THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 

SCHOOL  OF  LAW 


PRATT'S  DIGEST 


OF 


FEDERAL   BANKING   LAWS 

1920  EDITION 


CONTAINING  THE  FULL  TEXT  OF  THE  NATIONAL  BANK  ACT, 
THE  FEDERAL  RESERVE  ACT  AND  OTHER  LAWS  OF 
INTEREST  TO  BANKS  WITH  ALL  AMENDMENTS, 
ANNOTATIONS,  CASES,  NOTES,  INFORMAL 
RULINGS,   REGULATIONS   AND   OPIN- 
IONS OF  COUNSEL  TO 
APRIL  1,  1920. 


COMPILED  AND  PUBLISHED  BY 

A.  S.   PRATT  &  SONS,  Inc. 

NATIONAL  "Rank  Acents  and  Attorneys 
WILKIN  S  BUILDING  WASHINGTON,  D.  C. 


? 


T        . 


Copyright,  1920,  by 
A.  S.  PRATT  &  SONS 

INCORPORATED 


s 


1 


Table  of  Contents 


PART  I. 


THE  NATIONAL  BANK  ACT,  AMENDMENTS  AND  SUPPLEMENTARY  ACTS. 
CHAPTEB  PAGE 

I.  Comptroller  of  the  Currency  1 

II.  Organization  and  Powers  of  National  Banks  7 

III.  Officers  and  Shareholders  54 

IV.  Issue  and  Redemption  of  Circulating  Notes  72 

V.  Regulation  of  the  Banking  Business   99 

VI.  Reports   and  Examinations    125 

VII.  Taxation    131 

VIII.  Dissolution  and  Receivership   144 

IX.  Crimes  and  Misdemeanors   169 

X.  Suits,  Jurisdiction  and  Evidence    184 

PART  II. 

THE  FEDERAL  RESERVE  ACT,   WITH   ALL   AMENDMENTS    TO   APRIL   1,    1920. 

I.  The  Federal  Reserve  Act,  with  all  Amendments  to  April  1, 

1920    193 

PART  III. 

ACTS  OF  A  GENERAL  NATURE,  SECTIONS  OF  REVISED  STATUTES  AND 
REGULATIONS,  NOT  INCLUDED  IN  PARTS  I  AND  II,  AFFECTING  NA- 
TIONAL BANKS. 

I.  The  Clayton  Act  and  The  Kern  Amendment  333 

II.  Government    Depositaries    345 

III.  Postal  Savings  Depositaries    361 

IV.  Currency  and  Money   376 

V.  Regulations    of    Treasury    Department    Relating    to    United 

States    Bonds    396 

PART  IV. 

SPECIAL  ARTICLES  ON  SUBJECTS  OF  INTEREST  TO  NATIONAL  BANKS. 

I.  Organization  De  Novo   420 

II.  By-Laws    451 

ill 


735G 


lv 

CHAPTEtt  PAGE 

III,  Reorganization  of  State  and  Private  Banks   457 

IV.  Conversion  of  State  Bank  to  National   461 

V.  Bonds  and  Circulation    472 

VI.  Consolidation  of  National  Banks    491 

VII.  Increase  and  Reduction  of  Capital  Stock,  Restoration  of  Im- 
paired Capital,  Change  of  Name  or  Location  505 

VIII.  Liquidation     522 

IX.  Extension  of  Corporate  Existence 534 


Table  of  Cases  Cited 


A 

PAGE 

Adair  v.  Robinson,  6  Tex.  Civ.  App.,  275 139 

Adams  v.  Nashville,  95  U.  S.,  19 137 

Adams  v.  Spokane  Drug  Company,  57  Fed.  Rep.,  888 167 

Agnew  v.  U.  S.,  165  U.  S.  36 173 

Albion  National  Bank  v.  Montgomery,  54  Neb.  681 118,  122,  124 

Albuquerque  National  Bank  v.  Perea,  147  U.  S.  87 142 

Aldrich  v.  Bingham,  131  Fed.  Rep.  363 61 

Aldrich  v.  Campbell,  97  Fed.  Rep.  663 62,  63 

Aldrich  v.  Chemical  National  Bank,  176  U.  S.  618 18 

Aldrich  v.  Yates,  95  Fed.  Rep.  78 63 

Allen  v.  First  National  Bank  of  Xenia,  23  Ohio  St.  97 106 

Allen  v.  Luke,  141  Fed.  Rep.  694 163,  164 

American  National  Bank  v.  Adams,  44  Okla.  129 11 

Amoskeag  Savings  Bank  v.  Purdy,  231  U.  S.  373 136,  139,  142 

Anderson  v.  Line,  14  Fed.  Rep.  405 59 

Anderson  v.  Phila.  Warehouse  Co.,  Ill  U.  S.  479 60 

Armstrong,  In  re,  41  Fed.  Rep.  381 166 

Armstrong  v.  Chemical  National  Bank,  41  Fed.  Rep.  234 166 

Armstrong  v.  Chemical  National  Bank,  83  Fed.  Rep.  556 14 

Armstrong  v.  Second  National  Bank,  38  Fed.  Rep.  883 100 

Armstrong,  Receiver  v.  "Warner,  49  Ohio  St.  376 167 

Aspey  v.  Whittemore,  199  Mass.  65 53 

Aspinwall  v.  Butler,  133  U.  S.  595 43,  190 

Assaria  State  Bank  v.  Dolley,  219  U.  S.,  121 19 

Atlantic  National  Bank  v.  Harris,  118  Mass.  147 46 

Atlantic  State  Bank  v.  Savery,  82  N.  Y.  291 14 

Auburn  Savings  Bank  v.  Hayes,  61  Fed.  Rep.  911 152,  168 

Auten  v.  Manistee  National  Bank,  67  Ark.  243 15,  149 

B 

Bailey  v.  Mosher,  63  Fed.  Rep.  488 163 

Bailey  v.  Tillinghast,  99  Fed.  Rep.  801 62 

Baker  v.  Ault,  78  Fed.  Rep.  374 188 

Baker  v.  Beach,  85  Fed.  Rep.  836 65 

v 


vi 

PAGE 

Baker  v.  Schofield,  221  Fed.  Rep.  322 23,  151 

Baldwin  v.  State  National  Bank,  26  Minn.  43 22 

Bank  v.  Beach,  Fed.  Case  No.  2736 100 

Bank  v.  Conway,  87  Wash.  506 22 

Bank  v.  Kennedy,  17  Wall.  19 150,  152 

Bank  v.  Lanier,  11  Wall.  369 109,  110,  435 

Bank  v.  Mclntyre,  40  Ohio  St.  528 46 

Bank  v.  Williams,  58  N.  J.  Law  45 137 

Bank  of  Augusta  v .  Earle,  13  Pet.  519 100 

Bank  of  Bethel  v.  Pahquioque  Bank,  14  Wall.  383 149,  152,  154 

Bank  of  Cadiz  v.  Slemans,  34  Ohio  St.  142 124 

Bank  of  California  v.  Richardson,  248  U.  S.  476 135 

Bank  of  Redemption  v.  Boston,  125  U.  S.  60 135,  136 

Bank  of  Weston  v.  Lynch,  69  W.  Va.  333 119 

Barnet  v.  Muncie  National  Bank,  98  U.  S.  855 118,  119,  123 

Barron  v.  McKinnon,  196  Fed.  Rep.  933 12,  14,  23,  110 

Batchelor  v.  United  States,  156  U.  S.  426 174 

Bates  v.  Dresser,  229  Fed.  Rep.  772 164,  186 

Bath  Savings  Institution  v.  Sagadahoc  N.  B.  89  Me.  500 146 

Beall  v.  Essex  Savings  Bank,  67  Fed.  Rep.  816 60 

Beard's  Estate,  In  re,  7  Wyoming  104 63 

Bell  v.  Hanover  National  Bank,  57  Fed.  Rep.  821 16G 

Bethel  v.  Pahquioque  Bank,  14  Wall.  383 154 

Billingsley  v.  United  States,  178  Fed.  Rep.  654 173,  175 

Binghampton  Trust  Co.  v.  Auten,  68  Ark.  299 118 

Birmingham  National  Bank  v.  Mayer,  104  Ala.  634 146 

Blair  v.  First  National  Bank  of  Mansfield,  10  Chicago  Legal  News 

84;   2  Nat.  Bank  Cas.  173 16 

Bletz  v.  Columbia  National  Bank,  87  Pa.  St.  87 123,  187 

Board  of  Commissioners  of  Morgan  County  v.  First  National  Bank, 

57  N.  E.  Rep.  728 137 

Bobs  v.  People's  National  Bank,  21  Fed.  Rep.  888 122 

Boone  County  National  Bank  v.  Latimer,  67  Fed.  Rep.  27 167 

Bowden  v.  Johnson,  107  U.  S.  251 152 

Bowen  v.  Needles  National  Bank,  94  Fed.  Rep.  925 15 

Bowerman  v.  Hamner,  250  U.  S.  504 162 

Boyd  v.  Schneider,  124  Fed.  Rep.  239;  131  Fed.  Rep.  223 163,  164 

Boyer  V.  Boyer,  113  U.  S.  690 138,  142 

Boynoll  v.  State,  25  Wis.  112 140 

Braden's  Estate,  In  re,  165  Pa.  St.  184 35 

Bradley  v.  People,  4  Wall.  459 140 

Breese  v.  U.  S.,  106  Fed.  Rep.  680 175 

Bridgers  v.  First  National  Bank,  152  N.  C.  293 55 

Briggs  v.  Spaulding,  141  U.  S.  132 69,  162,  163 

Brinkerhoff  v.  Bostwick,  88  N.  Y.  52 153,  163.  186 


vil 

PAGE 

Britten  v.  Evansville  National  Bank,  105  U.  S.  322 138 

Brooks  V.  Neal,  223  Mass.  467 152 

Brown  v.  Ellis,  103  Fed.  Rep.  834 63 

Brown  v.  Finn,  142  U.  S.  56 59 

Brown  v.  French,  80  Fed.  Rep.  166 142 

Brown  v.  Marion  National  Bank,  169  U.  S.  416 120,  124 

Brown  v.  Schleier,  118  Fed.  Rep.  981 21 

Bullard  v.  National  Bank,  18  Wall.  589 109 

Bundy  v.  Cocke,  128  U.  S.  185 59 

Bundy  v.  Jackson,  24  Fed.  Rep.  628 110 

Burnham  v.  First  National  Bank,  53  Fed.  Rep.  163 186 

Burrows  v.  Niblack,  84  Fed.  Rep.  Ill 110 

Burrows  v.  Smith,  95  Va.  694 139 

Bushnell  v.  Chatauqua  Co.  Natl.  Bank,  74  N.  Y.  290 11 

Bushnell  v.  Leland,  164  U.  S.  684 148 

Butler  v.  Eaton,  141  U.  S.  240 36 

Butler  v.  Poole,  44  Fed.  Rep.  586 , 63,  151,  152,  187 

C 

Cadle  v.  Baker,  20  Wall.  650 149 

California  Natl.  Bank  v.  Kennedy,  167  U.  S.  362 12,  13 

Cal.  Natl.  Bank  of  San  Diego,  In  re,  53  Fed.  Rep.  38 151 

Carlon  v.  First  National  Bank,  157  Fed.  Rep.  809 129 

Case  v.  Citizens'  Bank,  100  U.  S.  446 37 

Case  v.  Citizens'  Bank  of  Louisiana,  Fed.  Case  No.  2489 166 

Case  v.  First  Natl.  Bank,  109  N.  Y.  Supp.  1119 17 

Case  v.  Small,  10  Fed.  Rep.  722 151 

Casey  v.  Galli,  94  U.  S.  673 58,  61,  62,  191,  470 

Castles  v.  City  of  New  Orleans,  46  La.  Ann.  542 142 

Catch  v.  Fitch,  34  Fed.  Rep.  566 61 

Central  National  Bank  v.  Pratt,  115  Mass.  539 123 

Chadwick  v.  United  States,  141  Fed.  Rep.  225 176 

Charleston  v.  People's  National  Bank,  5  S.  C.  103 42,  135 

Charleston  National  Bank  v.  Bradford,  51  W.  Va.  255 119,  123 

Chatham  &  Phoenix  Natl.  Bank  v.  Guaranty  Trust  Co.,  256   Fed. 

Rep.    90 359 

Chattahoochee  Natl.  Bank  v.  Schley,  58  Ga.  360 11 

Chemical  Natl.  Bank  v.  Armstrong,  59  Fed.  Rep.  372 155 

Chemical  Natl.  Bank  v.  Armstrong,  65  Fed.  Rep.  573 14 

Chemical  Natl.  Bank  v.  Hartford  Deposit  Co.,  156  111.  522  s.  c.  161 

U.  S.  1 149,  152 

Chemical  Natl.  Bank  of  Chicago  v.  Worlds'  Columbian  Exposition, 

170   111.   82 166 


riii 

PAGE 

Cherry  V.  City  Natl.  Bank,  144  Fed.  Rep.  587 14 

Chesborough  v.  Woodworth,  195  Fed.  Rep.  875 165 

Christopher  v.  Norvell,  201  U.  S.  216 58,  59 

Church  v.  Ayer,  80  Fed.  Rep.  543 63 

Citizens'  Bank  of  Louisiana  v.  Board  of  Assessors,  52  Fed.  Rep.  73..  135 

Citizens'  Natl.  Bank  v.  Appleton,  216  U.  S.  196 15,  19 

Citizens'  Natl.  Bank  v.  Donnell,  195  U.  S.  369 118,  124 

Citizens'  Natl.  Bank  v.  Dowd,  35  Fed.  Rep.  340 167 

Citizens'  Natl.  Bank  v.  Forman's  Assignee,  111  Ky.  206 117,  121 

Citizens'  Natl.  Bank  of  Kingman  v.  Berry,  53  Kans.  696 16,  70 

Citizens'  Natl.  Bank  of  Lebanon  v.  Burton,  90  S.  W.  944 140 

City  Natl.  Bank  v.  Phelps,  97  N.  Y.  44 , 46 

City  Natl.  Bank  of  Mangum  v.  Crow,  27  Okla.  107 164 

City  of  Boston  v.  Beal,  55  Fed.  Rep.  26,  s.  c.  51  Fed.  Rep.  306 141 

City  of  Carthage  v.  First  Natl.  Bank,  71  Mo.  508 141 

Clement  v.  United  States,  149  Fed.  Rep.  305 51 

Clement  Natl.  Bank  v.  Vermont,  231  U.  S.  120 142 

Cleveland,  Brown  &  Co.  v.  Shoeman,  40  Ohio  S.  176 12 

Clews  v.  Barden,  36  Fed.  Rep.  617 163 

Cochran  v.  U.  S.,  157  U.  S.  286 173,  175 

Coffey  v.  National  Bank  of  Missouri,  46  Mo.  140 11,  46 

Coffin  v.  United  States,  162  U.  S.  664 172,  174,  175 

Cogswell  v.  Second  National  Bank,  56  Atl.  Rep.  574 187 

Commercial  Bank  v.  Weinhard,  192  U.  S.  243,  s.  c.  41  Ore.  359.  .112,  515 

Commercial  Natl.  Bank  v.  Chambers,  182  U.  S.  556 136,  139 

Commercial  Natl.  Bank  v.  Pirie,  82  Fed.  Rep.  799 15 

Commissioners  of  Rice  County  v.  Citizens'  National  Bank  of  Fair- 

ibault,  23  Minn.  280 137 

Commonwealth  v.  Barry,  116  Mass.  1 174 

Commonwealth  v.  Felton,  101  Mass.  204 174,  187 

Commonwealth  v.  Ketner,  92  Pa.  St.  372 174,  187 

Commonwealth  v.  Tanney,  97  Mass.  50 174 

Conklin  v.  The  Second  Natl.  Bank,  45  N.  Y.  655 110 

Cook  County  Natl.  Bank  v.  United  States,  107  U.  S.  445 149,  155,  167 

Corcoran  v .  Batchelder,  147  Mass.  541 106 

Corn  Exchange  Bank  v.  Blye,  101  N.  Y.  303 167 

Corn  Exchange  Natl.  Bank  v.  Kaiser,  160  Wis.  199 13 

County  Commissioners  v.  Farmers'  and  Mechanics'  National  Bank 

48    Md.    117 136 

Cox  v.  Beck,  83  Fed.  Rep.  269 , 119 

Cragie  v.  Hadley,  99  N.  Y.  131 166 

Crocker  v.  First  Natl.  Bank,  Fed.  Case  No.  3397 122 

Crocker  v.  Whitney,  71  N.  Y.  161. 22 

Cross  v.  North  Carolina,  132  U.  S.  131 173,  174 


lx 

PAGE 

Cummings  v.  Natl.  Bank,  101  U.  S.  153 142 

Cummings  v.  U.  S.,  232  Fed.  Rep.  844 172 

D 

Daggs  v.  Phoenix  Bank,  177  U.  S.  549 117 

Danforth  v.  Natl.  State  Bank,  48  Fed.  Rep.  271 117 

Davis  v.  Cook,  9  Mo.  134 186 

Davis  v.  Elmira  Savings  Bank,  161  U.  S.  275,  rev.  142  N.  Y.  590 167 

Davis  v.  Essex  Baptist  Society,  44  Conn.  582 65 

Davis  v.  Weed,  44  Conn.  569 58 

Delano  v.  Butler,  118  U.  S.  634 43 

Dennis  v.  First  Natl.  Bank  of  Seattle,  127  Cal.  453 188 

Denton  v.  Baker,  79  Fed.  Rep.  189 156 

Deposit  Bank  of  Owensboro  v.  Davies,  102  Ky.  174 140 

Deweese  v.  Smith,  106  Fed.  Rep.  438 2,  62,  63,  64 

Dolley  v.  Abilene  Natl.  Bank,  179  Fed.  Rep.  461 19 

Doty  v.  First  Natl.  Bank  of  Larimore,  3  N.  D.  9 35,  36 

Dow  v.  United  States,  82  Fed.  Rep.  904 172,  173 

Dresser  v.  Traders'  Natl.  Bank,  165  Mass.  120 17 

Driesbach  v.  Natl.  Bank,  104  U.  S.  52 119 

E 

Eans  v.  Exchange  Bank,  79  Mo.  182 , 46 

Earle,  In  re,  92  Fed.  Rep.  22;  96  Fed.  Rep.  678 151 

Earle  v.  Conway,  178  U.  S.  456 188 

Earle  v.  Pennsylvania,  178  U.  S.  449 188 

Easton  v.  Iowa,  188  U.  S.  220 174 

Eaton  v.  Union  County  Natl.  Bank,  141  Ind.  136 142 

Elder  v.  First  Natl.  Bank  of  Ottawa,  12  Kans.  238 106 

Ellerbee  v.  Natl.  Exchange  Bank,  109  Mo.  445 14 

Ellis  v.  First  Natl.  Bank  of  Olney,  11  111.  App.  275 119 

Ellis  v.  Little,  27  Kans.  707 151 

Elwood  v.  First  Natl.  Bank,  41  Kans.  475 145,  146 

Emigh  v.  Earling,  134  Wis.  565 , 19 

Engelke  v.  Schlender,  75  Tex.  559 139 

Eno,  In  ro,  54  Fed.  Rep.  669 , 174,  187 

Evans  v.  Natl.  Bank  of  Savannah,  251  U.  S.  108 117 

Evans  v.  United  States,  153  U.  S.  608 175 

Exchange  Bank  v.  Peters,  45  Fed.  Rep.  13 163 

Exeter  Natl.  Bank  v.  Orchard,  42  Neb.  579 123 


F 

PAGE 

Faber  v.  Stephens,  35  Fed.  Rep.  17 167 

Farmers'  &  Mechanics'  Bank  v.  Hoagland,  7  Fed.  Rep.  159 120 

Farmers'  &  Mechanics'  Natl.  Bank  v.  Dearing,  91  U.  S.  29 116,  123 

Farmers'  &  Merchants'  Natl.  Bank  v.  Smith,  77  Fed.  Rep.  129 15 

Farmers'  &  Traders'  Natl.  Bank  v.  Hoffman,  93  Iowa  119 135,  141 

Farmers'  Natl.  Bank  v.  McCoy,  42  Okla.  420 120,  124 

Farmers'  Natl.  Bank  v.  Suther,  28  Okla.  806 145 

Farmers'  Natl.  Bank  v.  Templeton,  40  S.  W.  Rep.  412 71 

Fellows  v.  First  Natl.  Bank  (Mich.),  159  N.  E.  335 234 

Fidelity  &  Deposit  Co.  17.  Natl.  Bank  of  Com.    (Tex.),  106   S.  W. 

Rep.  782 15 

First  Natl.  Bank  v.  Albright,  208  U.  S.  548 142 

First  Natl.  Bank  v.  Bailey,  15  Mont.  301 142 

First  Natl.  Bank  v.  Beaman,  257  Fed.  Rep.  729 218 

First  Natl.  Bank  v.  Brodhecker,  137  Ind.  693 142 

First  Natl.  Bank  v.  Chapman,  173  U.  S.  205 136 

First  Natl.  Bank  v.  Chehalis  County,  6  Wash.  64 135,  138 

First  Natl.  Bank  v.  City  of  Richmond,  39  Fed.  Rep.  309 138 

First  Natl.  Bank  v.  Converse,  200  U.  S.  425 13 

First  Natl.  Bank  v.  Davis,  135  Ga.  687 121 

First  Natl.  Bank  v.  Fellows,  244  U.  S.  416 234 

First  Natl.  Bank  v.  Forest,  40  Fed.  Rep.  705 186 

First  Natl.  Bank  v.  Garlinghouse,  22  Ohio  St.  492 123 

First  Natl.  Bank  v.  Grimes,  49  Kans.  219 119,  120 

First  Natl.  Bank  v.  Haire,  36  Iowa  443 22 

First  Natl.  Bank  v.  Hunter,  109  Tenn.  91 119 

First  Natl.  Bank  v.  Lanz,  202  Fed.  Rep.  117 110 

First  Natl.  Bank  v.  Latham,  37  Okla.  286 121 

First  Natl.  Bank  v.  Lavater,  196  U.  S.  115 120 

First  Natl.  Bank  v.  Lindsay,  45  Fed.  Rep.  619 138,  140 

First  Natl.  Bank  v.  Maxfield,  83  Me.  576 22 

First  Natl.  Bank  v.  Monroe,  135  Ga.  614 15,  19 

First  Natl.  Bank  v.  Morgan,  132  U.  S.  141 120 

First  Natl.  Bank  v.  Murray,  212  Fed.  Rep.  140 49 

First  Natl.  Bank  v.  Natl.  Exchange  Bank,  92  U.  S.  122 12,  13 

First  Natl.  Bank  v.  Peterborough,  56  N.  H.  38 136 

First  Natl.  Bank  v.  Selden,  120  Fed.  Rep.  212 168 

First  Natl.  Bank  v.  Strong,  138  111.  347 11 

First  Natl.  Bank  v.  Watt,  184  U.  S.  151 121 

First  Natl.  Bank  of  Allentown  v.  Hock,  89  Pa.  St.  324 12 

First  Natl.  Bank  of  Centralia  v.  Marshall,  26  111.  App.  440 145 

First  Natl.  Bank  of  Cincinnati  v.  Beaman,  257  Fed.  Rep.  729 137 

First  Natl.  Bank  of  Cincinnati  v.  Durr,  246  Fed.  Rep.  163 137 


PAGE 

First  Natl.  Bank  of  Concord  v.  Hawkins,  174  U.  S.  3C4,  372 13,  53 

First  Natl.  Bank  of  Concordia  v.  Rowley,  52  Kans.  394 122 

First  Natl.  Bank  of  Dorchester  v.  Smith,  39  Neb.  90 122 

First  Natl.  Bank  of  Grand  Forks  v.  Anderson,  1T2  U.  S.  573,  s.  c. 

5   N.   D.    451 IS 

First  Natl.  Bank  of  Holstein  v.  Shallenberger,  172  Fed.  Rep.  999. . .  19 

First  Natl.  Bank  of  Leoti  v.  Fisher,  45  Kan.  726 135,  138 

First  Natl.  Bank  of  Lynn  v.  Ocean  Natl.  Bank,  60  N.  Y.  278 11 

First  Natl.  Bank  of  Moscow  v.  American  Natl.  Bank,  173  Mo.  153. .  15 

First  Natl.  Bank  of  Mt.  Pleasant  v.  Tinstman,  Fed.  Case  No.  4805. .  116 

First  Natl.  Bank  of  Pierre  v.  Smith,  8  S.  D.  7 14 

First  Natl.  Bank  of  Rochester  v.  Harris,  108  Mass.  514 10 

First  Natl.  Bank  of  Rochester  v.  Pierson,  24  Minn.  140 14 

First  Natl.  Bank  of  Tecumseh  v.  Overman,  22  Neb.  116 124 

First  Natl.  Bank  of  Youngstown  v.  Hughes,  6  Fed.  Rep.  737 141 

Fish  v.  Olin,  76  Vt.  120 i 152 

Fisher  v.  Yoder,  53  Fed.  Rep.  565 152,  186 

Flannagan  v.  California  Natl.  Bank,  56  Fed.  Rep.  959 16 

Flickner  v.  United  States,  150  Fed.  Rep.  1 172 

Foil's  Appeal,  21  Alb.  L.  J.;  2  N.  B.  C.  411 37 

Foster  v.  Chase,  75  Fed.  Rep.  797 61 

Foster  v.  Wilson,  75  Fed.  Rep.  797 61 

Fourth  Natl.  Bank  v.  Stahlman,  132  Tenn.  367 13,  21 

Fowler  v.  Gowing,  152  Fed.  Rep.  801,  165  Fed.  Rep.  891 , 61,  65 

Fowler  v.  Scully,  72  Pa.  St.  451 2.2 

Fraaer  v.  Seibern,  16  Ohio  St.  614 140 

Freeman  v.  Jackson,  227  Fed.  Rep.  688 164 

Freeman   Manufacturing  Co.   v.   Natl.   Bank   of   the    Republic,   160 

Mass.    398 1S8 

Fridley  v.  Bowen,  87  111.  151 22 

G 

Garner  v.  Second  Natl.  Bank,  66  Fed.  Rep.  369 188 

Geiger  v.  United  States,  162  Fed.  Rep.  844 175 

George  v.  Wallace,  135  Fed.  Rep.  286 16,  185,  186 

Gibson  v.  Peters,  150  U.  S.  342 153,  189 

Gilbert  v.  McNulta,  96  Fed.  Rep.  83 186 

Gold  Mining  Co.  v.  Rocky  Mountain  Natl.  Bank,  96  U.  S.  640 106 

Graham  v.  Piatt,  28  Colo.  421 59 

Graves  v.  United  States,  165  U.  S.  323 173 

Gray  v.  Faulkhauser,  58  Oregon  423 35 

Green  v.  Bennet,  110  N.  W.  Rep.   108 145 

Grow  v.  Cockrell,  63  Ark.  418 16 

Gruber  v.  First  Natl.  Bank,  87  Pa.  St.  468 116 


XH 

PAGE 

Guarantee  Co.  v.  Hanway,  104  Fed.  Rep.  369 1SG 

Guernsey  v.  Black  Diamond  Coal  &  Mining  Co.,  99  Iowa  471 70 

Guild  v.  First  Natl.  Bank  of  Deadwood,  4  S.  D.  566 120 

Guthrie  v.  Harkness,  199  U.  S.  148 130 

H 

Hade  v.  McVey,  31  Ohio  St.  231 123,  187 

Hager  v.  Union  Natl.  Bank,  63  Me.  509 110 

Hale  v.  Walker,  31  Iowa  344 60 

Hall  v.  First  Natl.  Bank  of  Fairfield,  30  Neb.  94,  99 117,  121 

Hanna  v.  Lyon,  179  N.  Y.  107 163 

Hanover  Natl.  Bank  v.  First  Natl.  Bank,  109  Fed.  Rep.  421 15 

Hanson  v.  Heard,  69  N.  H.  190 16,  118 

Harper  v.  United  States,  104  S.  W.  Rep.  673;  170  Fed.  Rep.  385.  .173,  174 
Harrington  v.  First  Natl.  Bank,  1  Thompson  &  Cook  (N.  Y.)  361. . .     17 

Haseltine  v.  Central  Natl.  Bank,  183  U.  S.  132 116,  119 

Hayden  v.  Chemical  Natl.  Bank,  80  Fed.  Rep.  587 166 

Hayden  v.  Thompson,  71  Fed.  Rep.  60 113 

Hayes  v.  Shoemaker,  39  Fed.  Rep.  319. 36 

Hays  v.  Beardsley,  136  N.  Y.  299 166 

Hazard  v.  Natl.  Exchange  Bank  of  Newport,  26  Fed.  Rep.  94 37 

Hazen  v.  Lyndonville  Natl.  Bank,  70  Vt.  543 186 

Hendee  v.  Conn.,  etc.,  R.  R.  Co.,  26  Fed.  Rep.  677.  .j 186 

Henderson  Natl.  Bank  v.  Alves,  91  Ky.  142 119  to  122,  124,  186 

Hennessey  v.  City  of  St.  Paul,  54  Minn.  219 18 

Hepburn  v.  School  Directors,  23  Wall.  480 137 

Herman,  In  re,  50  Fed.  Rep.  517 153 

Herrmann  v.  Edwards,  238  U.  S.  107 185 

Higgins  v.  Fidelity  Insurance,  T.  &  S.  Dep.  Co.,  108  Fed.  Rep.  475. .     60 

Hill  v.  Natl.  Bank  of  Barre,  15  Fed.  Rep.  432 121 

Hills  v.  Exchange  Bank,  105  U.  S.  319 142 

Hinds  v.  Marmelejo,  60  Cal.  229 117 

Hintermister  v.  First  Natl.  Bank,  64  N.  Y.  212 122,  123 

Hirsh  v.  Jones,  56  Fed.  Rep.  137 164 

Hiscock  v.  Lacy,  9  Misc.  (N.  Y.)  578 113 

Hobart,  Receiver,  etc.,  v.  Gould,  8  Fed.  Rep.  57 63 

Hobbs  v.  Western  Natl.  Bank,  Fed.  Case  No.  6551a 35 

Hodgson  v.  McKinstry,  3  Kans.  App.  412 , 145 

Holmes  v.  Boyd,  90  Ind.  322 22 

Home  Savings  Bank  v.  City  of  Des  Moines,  205  U.  S.  503 140 

Hoover  v.  Weiss  Malting  and  Elevator  Co.,  55  Fed.  Rep.  356 188 

Hotchkin  v.  Third  Natl.  Bank,  219  Mass.  234 12 

Hot  Springs  Independent  School  District  v.  First  Natl.  Bank,  61 

Fed.  Rep.  417 152,   186 


Xlll 

PAGE 

Howard  Natl.  Bank  v.  Loomis,  51  Vt.  349 22 

Howe  v.  Barney,  45  Fed.  Rep.  668 163 

Huggins  v.  Citizens'  Natl.  Bank,  6  Tex.  Civ.  33 119 

Hughitt  v.  Hayes,  136  N.  Y.  163 167 

Hulitt  v.  Bell,  85  Fed.  Rep.  98 112 

Hunt,  Appellant,  141  Mass.  515 86 

I 

International  Trust  Co.  v.  Weeks,  203  U.  S.  364 21,  186 

Interstate  Natl.  Bank  v.  Ferguson,  48  Kans.  732 11 

Irons  v.  Manufacturers'  Nat.  Bank,  Fed.  Case  No.  7068 146,  149 

J 

Jackson  v.  United  States,  20  Ct.  Cls.  298 155 

Jacobson  v.  Berry,  135  111.  App.  415 i 148 

Jenkins  v.  Neff,  186  U.  S.  230,  s.  c.  163  N.  Y.  320 136,  137 

Jerome  v.  Cogswell,  78  Conn.  75,  204  U.  S.  1 44 

Jewett  v.  United  States,  100  Fed.  Rep.  832 , 526 

Johnson  v.  Laflin,  5  Dill.  65;  103  U.  S.  800 36,  37 

Johnson  v.  Natl.  Bank  of  Gloversville,  74  N.  Y.  329 116 

Jones  v.  Rushville  Natl.  Bank,  138  Ind.  87 142 

Jones  Natl.  Bank  v.  Yates,  240  U.  S.  541 165 

Junction  City  v.  Bank,  96  Kans.  407 13 

K 

Keliher  v.  United  States,  193  Fed.  Rep.  8 174,  175 

Kelsey  v.  National  Bank  of  Crawford,  69  Pa.  St.  425 46 

Kennedy  v.  California  Savings  Bank,  101  Cal.  495 13 

Kennedy  v.  Gibson,  8  Wall.  498,  505 62,  150,  152  to  154 

Kerfoot  v.  Farmers'  &  Merchants'  Bank,  218  U.  S.  281 23 

Kettenbach  v.  United  States,  202  Fed.  Rep.  377 172  to  174 

Keyser  v.  Hitz,  133  U.  S.  138 3,  36,  47,  59,  190 

Kimball  v.  Aspey,  164  Fed.  Rep.  830 53 

King  v.  Armstrong,  50  Ohio  St.  222 63 

King  v.  Miller,  53  Oregon  53 17 

King  v.  Pomeroy,  121  Fed.  Rep.  287 149,  164 

Korbly  v.  Springfield  Inst,  for  Savings,  245  U.  S.  330 64,  112 

L 

Lake  Erie,  etc.,  R.  R.  Co.  v.  Indianapolis  Natl.  Bank,  65  Fad.  Rep. 

690 167 

Lanham  v.  First  Natl.  Bank  of  Crete,  46  Neb.  663 123 


xlv 

PAGE 

Lantry  v.  Wallace,  182  U.  S.  536 64,  110 

Lasater  v.  First  Natl.  Bank  of  Jacksboro,  96  Tex.  345 122 

Latimer  v.  Bard,  76  Fed.  Rep.  536 60 

Lazear  v.  Natl.  Union  Bank  of  Baltimore,  52  Md.  78 122,  123 

Leach  v.  Hale,  31  Iowa  69 11,  12 

Leather  Mfgr.  Natl.  Bank  v.  Cooper,  120  U.  S.  778 185 

Letcher  v.  German  Natl.  Bank,  119  S.  W.  Rep.  (Ky.)  236 35 

Levitan  v.  Houghton  Natl.  Bank,  174  Mich.  566 184 

Lewis  v.  Switz,  74  Fed.  Rep.  381 59,  65 

Libby  v.  Union  Natl.  Bank,  99  111.  622 22 

Linn  Co.  Natl.  Bank  v.  Crawford,  69  Fed.  Rep.  532 152,  186 

Lionberger  v.  Rouse,  9  Wall.  468. 139,  140 

Lockwood  v.  The  American  Natl.  Bank,  9  R.  I.  308 46 

Logan  County  Natl.  Bank  v.  Townsend,  139  U.  S.  67 11,  18,  186 

Lowry  Natl.  Bank,  In  re,  29  opp.  Atty.  Gen.  81 47,  100 

Luberg  v.  Commonwealth,  94  Pa.  St.  85 174 

Lucas  v.  Coe,  86  Fed.  Rep.  972 64 

Lucas  v.  Government  Natl.  Bank,  78  Pa.  St.  228 119 

Lucas  County  v.  Jamison,  179  Fed.  Rep.  338 155 

Lull  v.  Anamosa  Natl.  Bank,  110  Iowa  537 141 

Lynch  v.  Bank,  22  W.  Va.  534 122 

Lyons  v.  Bank  of  Discount,  154  Fed.  Rep.  391 148 

M 

Magoffin  v.  Boyle  Natl.  Bank,  69  S.  W,  (Ky.)  702 22 

Magruder  v.  Colston,  44  Md.  349 60 

Marion  Natl.  Bank  v.  Burton,  90  S.  W.  944 140 

Marion  Natl.  Bank  v.  Thompson,  101  Ky.  277 119 

Market  Natl.  Bank  v.  Pacific  Natl.  Bank,  30  Hun  (N.  Y.)  50 166 

Massey  v.  Fisher,  62  Fed.  Rep.  958 167 

Matthews  v.  Columbia  Natl.  Bank,  79  Fed.  Rep.  558 43,  55,  56 

Mayor  v.  First  Natl.  Bank,  59  Ga.  648 141 

McBoyle  v.  Union  Natl.  Bank,  162  Cal.  277 13 

McBride  v.  Illinois  Natl.  Bank,  128  App.  Div.  (N.  Y.)  503 188 

McCann  v.  First  Natl.  Bank  of  Jeffersonville,  112  Ind.  354 44 

McCarthy  v.  First  Natl.  Bank,  223  U.  S.  493;  121  N.  W.  853.119,  121,  122 

McCartney  v.  Earle,  115  Fed.  Rep.  462 186 

McClaine  v.  Rankin,  197  U.  S.  154;  119  Fed.  Rep.  110. ..  .62,  63,  150,  151 
McCorroick  v.  Market  Natl.  Bank  of  Chicago,  165  U.  S.  538  s.  c.  162 

111.  100 9,  21,  439 

McCreary  v.  First  Natl.  Bank  of  Morristown,  109  Tenn.  128 121,  123 

McDonald  v.  Chemical  Bank,  174  U.  S.  610 166 

McDonald  v.  Thompson,  184  U.  S.  71 63 


XV 

PAGE 

McFarlin  v.  First  Natl.  Bank  of  Kansas  City,  G8  Fed.  Rep.  8C8 42,  60 

McGhee  v.  First  Natl.  Bank  of  Tobias,  40  Neb.  92 120 

McKinnon  v.  Morse,  177  Fed.  Rep.  576 161 

McKnight  v.  U.  S.,  115  Fed.  Rep.  972. 172 

McMahon  v.  Macy,  51  N.  Y.  155 65 

McQuiddy  v.  King,  191  Ala.  205 39 

Mechanics'  Natl.  Bank  v.  Baker,  65  N.  J.  Law  113 137 

Mercantile  Natl.  Bank  v.  Mayor,  172  N.  Y.  35 136 

Mercantile  Natl.  Bank  v.  New  York,  121  U.  S.  138 136,  137 

Mercantile  Natl.  Bank  v.  Shields,  59  Fed.  Rep.  952 138 

Mercer  v.  Dyer,  15  Mont.  317 167 

Merchants'  &  Planters'  Natl.  Bank  v.  Horton,  27  Okla.  689 122 

Merchants'  Bank  of  Valdosta  v.  Baird,  160  Fed.  Rep.  642 15 

Merchants'  Natl.  Bank  v.  Glendon,  120  Mass.  97 190 

Merchants'  Natl.  Bank  v.  Hanson,  33  Minn.  40 14 

Merchants'  Natl.  Bank  v.  Natl.  Bank,  231  Fed.  Rep.  556 146 

Merchants'  Natl.  Bank  v.  Sevier,  14  Fed.  Rep.  662 120 

Merchants'  Natl.  Bank  v.  Sharkey,  64  Ore.  32 119 

Merchants'  Natl.  Bank  v.  State  Natl.  Bank,  10  "Wall.  604 86,  100 

Merchants'  Natl.  Bank  v.  Wehrmann,  202  U.  S.  295;  69  Ohio  St.  160..    17 

Merrill  v.  Florida  Land  &  Improvement  Co.,  60  Fed.  Rep.  17 61 

Merrill  v.  Natl.  Bank  of  Jacksonville,  173  U.  S.  131 154,  155,  156 

Metropolitan  Natl.  Bank  v.  Claggett,  141  U.  S.  520 46,  186,  470 

Metropolitan  Stock  Exchange  v.  Lyndonville  Natl.  Bank  (Vt.),  57 

Atl.  Rep.   101 18 

Metropolitan  Trust  Co.  v.  McKinnon,  172  Fed.  Rep.  846 12,  111 

Meyers  v.  Valley  Natl.  Bank,  Fed.  Case  No.  9519 Ill 

Michigan  Insurance  Bank  v.  Eldred,  143  U.  S.  293 46 

Miller  v.  First  Natl.  Bank  of  Cincinnati,  46  Ohio  St.  424 135 

Miller  v.  Howard,  95  Tenn.  407 162 

Miller  v.  King,  223  U.  S.  505 19 

Missouri  River  Telegraph  Co.  v.  First  Natl.  Bank,  74  111.  217 124 

Mix  v.  Natl.  Bank  of  Bloomington,  91  111.  20 190 

Moore  v.  Jones,  3  Woods  53 60 

Morris  v.  Third  Natl.  Bank,  142  Fed.  Rep.  25 14,  22 

Morse  v.  United  States,  174  Fed.  Rep.  539 173 

Moss  v.  Goodhart,  209  Fed.  Rep.  102;  47  Mont.  257 151,  164 

Moss  v.  Whitzel,  108  Fed.  Rep.  579 145,  156 

Movius  v.  Lee,  30  Fed.  Rep.  298 69,  162 

Muir  v.  Citizens'  Natl.  Bank,  39  Wash.  57 145 

Multnomah  County  v.  Oregon  Natl.  Bank,  61  Fed.  Rep.  912 167 

Murray  v.  Chambers,  151  Fed.  Rep.  142 186 

Murray  v.  Walker,  156  Ky.  536 35,  130 


xvi 

N 

PAGE 

Natl.  Bank  v.  Bruhn,  64  Tex.  571 117 

Natl.  Bank  v.  Carpenter,  52  N.  J.  Law  165 122 

Natl.  Bank  v.  Case,  99  U.  S.  628 12,  60,  111 

Natl.  Bank  v.  Commonwealth,  9  Wall.  353 141 

Natl.  Bank  v.  Drake,  35  Kans.  564 68 

Natl.  Bank  v.  Graham,  100  U.  S.  699 11 

Natl.  Bank  v.  Insurance  Co.,  104  U.  S.  54 145 

Natl.  Bank  v.  Johnson,  104  U.  S.  271 116 

Natl.  Bank  v.  Matthews,  98  U.  S.  621 14,  18,  22,  23 

Natl.  Bank  v.  Whitney,  103  U.  S.  99 14 

Natl.  Bank  of  Brunswick  v.  Sixth  Natl.  Bank,  212  Pa.  St.  238 15 

Natl.  Bank  of  Chattanooga  v.  Mayor,  8  Heiskell  (Tenn)  814 141 

Natl.  Bank  of  Commerce  v.  Atkinson,  55  Fed.  Rep.  465 15,  71 

Natl.  Bank  of  Commerce  v.  Equitable  Trust  Co.,  227  Fed.  Rep.  526 

s.  c.  211  Fed.  Rep.  688 19 

Natl.  Bank  of  Commonwealth  v.  Mechanics'  Natl.  Bank,  94  U.  S.  437.  155 

Natl.  Bank  of  Daingerfield  v.  Ragland,  181  U.  S.  45. . 121 

Natl.  Bank  of  Guthrie  v.  Earl,  2  Okla.  617 1 G 

Natl.  Bank  of  St.  Albans,  In  re,  49  Fed.  Rep.  120 59 

Natl.  Bank  of  Rahway  v.  Carpenter,  52  N.  J.  Law  165 121 

Natl.  Bank  of  Virginia  v.  City  of  Richmond,  42  Fed.  Rep.  877 135 

Natl.  Bank  of  Winterset  v.  Eyre,  52  Iowa  114 123 

Natl.  Bank  of  Xenia  v.  Stewart,  107  U.  S.  676 110 

Natl.  Exchange  Bank  of  Balto.  v.  Peters,  44  Fed.  13 164 

Natl.  Exchange  Bank  of  Hartford  v.  Guy,  57  Conn.  224 52 

Natl.  Park  Bank  of  N.  Y.  v.  Harmon,  214  Fed.  Rep.  891. 60 

Natl.  Security  Bank  v.  Butler,  129  U.  S.  223 166 

Natl.  Security  Bank  v.  Price,  22  Fed.  Rep.  697 166 

Natl.  State  Bank  v.  Brainard,  61  Hun.  339 119 

Natl.  State  Bank  of  Oskaloosa  v.  Young,  25  Iowa  311 134,  136 

Nevada  Bank  of  San  Francisco  v.  Portland  Natl.  Bank,   59   Fed. 

Rep.  338 , 16 

Newell  v.  Natl.  Bank  of  Somerset,  12  Bush.  (Ky.)  57 117,  124 

Newell  v.  Somerset  First  Natl.  Bank,  13  Ky.  L.  Rep.  775 123 

New  Orleans  Natl.  Bank  v.  Raymond,  29  La.  Ann.  355 22 

New  York  L.  E.  and  W.  R.  R.  Co.,  Matter  of,  99  N.  Y.  12 422 

Newport  Natl.  Bank  v.  Board  of  Education,  114  Ky.  87 13 

Newton  Natl.  Bank  v.  Newbegin,  74  Fed.  Rep.  135 61 

Noble  State  Bank  v.  Haskell,  219  U.  S.  104 19 

Norfolk  Natl.  Bank  v.  Schwenk,  46  Neb.  381 119,  123 

North  Ward  Natl.  Bank  v.  City  of  Newark,  39  N.  J.  Law  380 136 

Norton  v.  United  States,  205  Fed.  Rep.  593 172 


xvn 
O 

PAGE 

Oates  v.  First  Natl.  Bank,  100  U.  S.  239 123 

O'Connor  v.  Whitherby,  111  Cal.  523 62 

O'Hare  v.  Second  Natl.  Bank  of  Titusville,  77  Pa.  St.  96 106 

Ohio  Valley  Natl.  Bank  v.  Hulitt,  204  U.  S.  162 13,  61 

Ordway  v.  Central  Natl.  Bank,  47  Md.  217 123,  145,  186 

Ornn  v.  Merchants'  Natl.  Bank,  16  Kans.  34 22 

Osborn  v.  First  Natl.  Bank,  175  Pa.  St.  494 120,  122 

Owensboro  Natl.  Bank  v.  Owensboro,  173  U.  S.  664 134 

Owinge  v.  Lehman,  190  111.  App.  432 37 

P 

Pacific  Natl.  Bank  v.  Eaton,  141  U.  S.  227 36,  43 

Pacific  Natl.  Bank  V.  Mixter,  124  U.  S.  721;   114  U.  S.  462 152,  188 

Palmer  v.  McMahon,  133  U.  S.  660 136 

Pape  v.  Capital  Bank  of  Topeka,  20  Kans.  440 14 

Park  Natl.  Bank  of  Chicago  v.  Neblack,  67  111.  App.  583 149 

Patterson  v.  Plummer,  10  N.  D.  95 141 

Pattison  v.  Syracuse  Natl.  Bank,  80  N.  Y.  82 11 

Paul  v.  McGraw,  3  Wash.  St.  296 141 

Pauly  v.  State  Loan  and  Trust  Co.,  165  U.  S.  606 60 

Pearce  v.  U.  S.,  192  Fed.  Rep.  561 172 

Pelton  v.  Commercial  Natl.  Bank,  101  U.  S.  143 136,  142 

People  v.  Binghampton  Trust  Co.,  139  N.  Y.  185 12 

People  v.  Brady,  271  111.  100 234 

People  v.  Commissioners,  4  "Wall.  241 139 

People  v.  Feitner,  191  N.  Y.  88 139 

People  v.  Remington,  121  N.  Y.  328 155 

People  v.  Weaver,  100  U.  S.  539,  reversing  67  N.  Y.  516  and  over- 
ruling People  v.  Dolan,  36  N.  Y.  59 138 

People  Ex.  Rel.  Lorge  v.  Consolidated  Natl.  Bank,  105  App.  Div. 

(N.    Y.),    409 130 

People's  State  Bank  of  Lakota  v.  Francis,  8  N.  D.  369 151,  153 

Pepper  v.  Fidelity  &  Casualty  Co.,  125  Fed.  Rep.  822 , 152 

Peterborough  Natl.  Bank  v.  Childs,  133  N.  Y.  248 119 

Peters  v.  Bain,  133  U.  S.  670 59 

Peters  v.  Commercial  Natl.  Bank,  142  U.  S.  614 185 

Peters  v.  Foster,  56  Huh.  607 149,  152 

Philler  et  al.  v.  Patterson,  168  Pa.  St.  468 17 

Pickett  v.  Merchants'  Natl.  Bank  of  Memphis,  32  Ark.  346 120 

Pittsburgh  Works  v.  State  Natl.  Bank,  Fed.  Case  No.  11,  198 12 

Planten  v.  Natl.  Nassau  Bank,  174  App.  Div.  (N.  Y.)  254. .  .145,  146,  164 


xviii 

PAQE 

Planters'  Bank  v.  Berry,  92  Ga.  2C4 188 

Piatt  v.  Beebe,  57  N.  Y.  339 148 

Potter  v.  United  States,  155  U.  S.  438 176 

Prescott  V.  Haughey,  65  Fed.  Rep.  663 164 

Prescott  Natl.  Bank  v.  Butler,  157  Mass.  548 14,  18 

Prettyman  v.  United  States,  180  Fed.  Rep.  30 171,  175 

Price  v.  Coleman,  22  Fed.  Rep.  694 166 


Rankin  v.  Barton,  199  U.  S.  228 186 

Rankin  v.  Cooper,  149  Fed.  Rep.  1010 164 

Rankin  v.  Emigh,  218  U.  S.  27 19 

Rankin  v.  Fidelity  Insurance,  etc.,  Co.,  189  U.  S.  242 60 

Rankin  v.  Herod,  140  Fed.  Rep.  661 186 

Rankin  v.  Miller,  207  Fed.  Rep.  602 62,  63 

Rankin  v.  Ware,  88  Kans.  23 62 

Raynor  v.  Pacific  Natl.  Bank,  93  N.  Y.  371 188 

Reynolds  v.  Crawfordsville  Bank,  112  U.  S.  405 14,  23 

Reynolds  v.  Touzalin  Imp.  Co.,  62  Neb.  236 18 

Rice  Co.  v.  Commercial  Natl.  Bank,  88  S.  E.  Rep.  999 15 

Richards  v.  Attleboro  Natl.  Bank,  148  Mass.  187 531 

Richardson  v.  United  States,  181  Fed.  Rep.  1 171,  173,  174,  175 

Richmond  v.  Irons,  121  U.  S.  27 58,  145,  149,  526,  531 

Riddle  ?;.  First  Natl.  Bank,  27  Fed.  Rep.  503 86 

Roberts  v.  Hill,  23  Fed.  Rep.  31 166 

Robertson  v.  Buffalo  Co.  Natl.  Bank,  40  Neb.  235 17 

Robinson  v.  Hall,  63  Fed.  Rep.  222,  reversing  59  Fed.  Rep.  648 

18,  153,  154,  162,  163 

Robinson  v.  Southern  Natl.  Bank,  94  Fed.  Rep.  964 60 

Robinson  v.  Turrentine,  59  Fed.  Rep.  554 59 

Rockwell  v.  Farmers'  Natl.  Bank,  4  Colo.  App.  562 117,  119 

Rosenblatt  v.  Johnson,  104  U.  S.  462 140 

S 

St.  Louis  Natl.  Bank  v.  Papin,  Fed.  Case  No.  12,  239 136 

Salter  v.  Williams,  244  Fed.  Rep.  126 61 

San  Diego  County  v.  California  Natl.  Bank,  52  Fed.  Rep.  59 167 

San  Francisco  v.  Crocker-Woolworth  Natl.  Bank,  92  Fed.  Rep.  273..  134 

Schaberg's  Estate  v.  McDonald,  60  Neb.  493 151 

Schofield  v.  Baker,  212  Fed.  Rep.  504 151 

Schofield  v.  State  Natl.  Bank,  97  Fed.  Rep.  282 15 


xix 

FAGE 

Schrader  v.  Mfgrs.  Natl.  Bank,  133  U.  S.  67 58,  145,  526,  531 

Schuyler  Natl.  Bank  v.  Bullong,  24  Neb.  821;  28  Neb.  684 

120,  121,  124,  186 

Schuyler  Natl.  Bank  v.  Gadsden,  191  U.  S.  451 123 

Scott  v.  Armstrong,  146  U.  S.  499 167 

Scott  v.  Latimer,  89  Fed.  Rep.  843 42,  64 

Scott  v.  United  States,  130  Fed.  Rep.  429 173 

The  Seattle,  170  Fed.  Rep.  284 106 

Second  Natl.  Bank  v.  Fitzpatrick,  111  Ky.  228 117,  119,  121,  122 

Seeber  v.  Commercial  Natl.  Bank  of  Ogden,  77  Fed.  Rep.  957 18 

Shafer  v.  First  Natl.  Bank,  53  Kans.  614 119 

Shaw  v.  Natl.  German-American  Bank,  132  Fed.  Rep.  658 13 

Shunk  v.  First  Natl.  Bank  of  Galion,  22  Ohio  St.  508 119 

Simons  v.  Fisher,  55  Fed.  Rep.  905 71 

Simpson  v.  United  States,  223  Fed.  Rep.  940 175 

Skud  v.  Tillinghast,  195  Fed.  Rep.  1. 153 

Slaughter  v.  First  Natl.  Bank,  109  Ala.  157 123,  124,  174 

Smalley  v.  McGraw,  148  Mich.  394 165 

Smith  v.  Exchange  Natl.  Bank  of  Pittsburgh,  26  Ohio  St.  141.  ..14,  123 

Smith  v.  First  Natl.  Bank  of  Chadron,  45  Neb.  444 106 

Smith  v.  First  Natl.  Bank  of  Crete,  42  Neb.  687 121 

Smith  v.  Phillips  Natl.  Bank,  114  Me.  297 53 

Smithson  v.  Hubbell,  81  Fed.  Rep.  593 186 

Snohomish  County  v.  Puget  Sound  Natl.  Bank,  81  Fed.  Rep.  518 185 

Snyder  v.  Mt.  Sterling  Natl.  Bank,  94  Ky.  231 120 

Sowles  v.  Witters,  39  Fed.  Rep.  403 63 

Spofford  v.  First  Natl.  Bank  of  Tama  City,  37  Iowa  181 12 

Spokane  County  v.  Clark,  61  Fed.  Rep.  538 167 

Sponberg  v.  First  Natl.  Bank,  18  Idaho  524. 21 

Stafford  Natl.  Bank  v.  Davis,  59  N.  H.  38 136 

State  v.  Clement  Natl.  Bank,  84  Vt.  167 141,  142 

State  v.  People's  Natl.  Bank,  70  Atl.  Rep.  (N.  H.)  542 11,  12 

State  v.  Tuller,  34  Conn.  280 174 

Stephens  v.  Bernays,  41  Fed.  Rep.  401 152 

Stephens  v.  Follett,  43  Fed.  Rep.  842 60 

Stephens  v.  Monongahela  Bank,  111  U.  S.  197 123 

Stephens  v.  Overstoltz,  43  Fed.  Rep.  465,  471 163,  164 

Stokes  V.  Continental  Trust  Co.,  186  N.  Y.  285 42 

Stout  v.  United  States,  227  Fed.  Rep.  799 175 

Studebaker  v.  Perry,  184  U.  S.  258;  102  Fed.  Rep.  947 2,  63,  64 

Supervisors  v.  Stanley,  105  U.  S.  305 138 

Sykes  v.  Canton  First  Natl.  Bank,  2  S.  D.  242 11 


XX 

T 

PA«E 

Talbott  v.  Silver  Bow  County,  139  U.  S.  438,  441 136,  140 

Tapley  v.  Martin,  116  Mass.  275 18,  190 

Taylor  v.  Hutton,  43  Barb.  195 71 

Taylor  v.  Thomas,  124  App.  Div.  (N.  Y.)   53 165 

Teague  v.  First  Natl.  Bank  of  Salina.  5  Kans.  App.  300 122 

Tecumseh  Natl.  Bank  v.  Chamberlain,  63  Neb.  1G3 153 

Thatcher  v.  West  River  Natl.  Bank,  19  Mich.  196 190 

Thayer  v.  Butler,  141  U.  S.  234 36,  59 

Third  Natl.  Bank,  In  re,  4  Fed.  Rep.  775 151 

Third  Natl.  Bank  v.  Blake,  73  N.  Y.  260 12,  22 

Third  Natl.  Bank  v.  Buffalo  German  Ins.  Co.,  193  U.  S.  581,  s.  c. 

162-  N.  Y.  163 109,  110 

Third  Natl.  Bank  v.  Hughes,  76  Fed.  Rep.  385 142 

Third  Natl.  Bank  of  Philadelphia  v.  Miller,  90  Pa.  St.  241 119 

Thomas  v.  City  Natl.  Bank  of  Hastings,  40  Neb.  501 15 

Thomas  V.  Farmers'  Bank  of  Maryland,  46  Md.  43 46 

Thomas  v.  Gilbert,  101  Pac.  Rep.   (Oregon)   393 112 

Thomas  v.  Taylor,  224  U.  S.  73 165 

Thompson  v.  German  Insurance  Co.,  76  Fed.  Rep.  892 63,  152 

Thompson  v.  St.  Nicholas  Natl.  Bank,  146  U.  S.  240 14,  109 

Tiffany  v.  Natl.  Bank,  18  Wall.  409 116 

Tillinghast  v.  Bailey,  86  Fed.  Rep.  46 60 

Timberlake  v.  First  Natl.  Bank,  43  Fed.  Rep.  231 117,  120,  122,  124 

Tootle  v.  First  Natl.  Bank  of  Port  Angeles,  6  Wash.  181 18 

Tourtelot  v.  Stoltenben,  101  Fed.  Rep.  362 61 

Town  Council  of  Lexington  v.  Union  Natl.  Bank,  75  Miss.  1 18 

Trabue  v.  Cook,  12  S.  W.  Rep.  455 122 

Traders'  Natl.  Bank  v.  Chipman,  164  U.  S.  347 168 

Trenholm  v.  Commercial  Natl.  Bank,  38  Fed.  Rep.  323 162 

Trustees  v.  Natl.  State  Bank,  57  N.  J.  Law  27 18 

Tuttle  v.  Iron  Natl.  Bank,  170  N.  Y.  9 145,  187 

U 

United  States  v.  Allen,  47  Fed.  Rep.  696 173 

United  States  v.  Breese,  131  Fed.  Rep.  915,  916 172 

United  States  v.  Britton,  107  U.  S.  655;  108  U  S.  199 172,  173 

United  States  v.  Cadwallader,  59  Fed.  Rep.  077 175 

United  States  v.  Conners,  111  Fed.  Rep.  734 178 

United  States  v.  Corbett,  215  U.  S.  233 172,  173 

United  States  v.  Crecelius,  34  Fed.  Rep.  30 173 

United  States  v.  Curtis,  107  U.  S.  671 68 

United  States  v.  Ege,  49  Fed.  Rep.  852 173 


xxi 

PAGE 

United  States  v.  Eno,  56  Fed.  Rep.  218 174 

United  States  v.  Fish,  24  Fed.  Rep.  585 172 

United  States  v.  French,  57  Fed.  Rep.  382 175 

United  States  v.  German,  115  Fed.  Rep.  987 172 

United  States  v.  Graves,  53  Fed.  Rep.  634 173 

United  States  v.  Harper,  33  Fed.  Rep.  471 172,  173 

United  States  v.  Heinze,  161  Fed.  Rep.   425;   183  Fed.  Rep.  907; 

218  U.  S.  532 109,  172,  175 

United  States  v.  Herrig,  204  Fed.  Rep.  124 173 

United  States  v.  Hillegas,  176  Fed.  Rep.  444 174 

United  States  v.  Hughitt,  45  Fed.  Rep.  47 173 

United  States  v.  Jewett,  84  Fed.  Rep.  142 175 

United  States  v.  Martindale,  146  Fed.  Rep.  280 172 

United  States  v.  McClarty,  191  Fed.  Rep.  523 173 

United  States  v.  Means,  42  Fed.  Rep.  599 173 

United  States  v.  Morse,  161  Fed.  Rep.  429 172 

United  States  v.  Northway,  129  U.  S.  327 175 

United  States  v.  Norton,  188  Fed.  Rep.  256 172,  175 

United  States  v.  Potter,  56  Fed.  Rep.  83 175 

United  States  v.  Smith,  152  Fed.  Rep.  542 175 

United  States  v.  Steinman,  172  Fed.  Rep.  913 172 

United  States  v.  Twining,  132  Fed.  Rep.  129 189 

United  States  v.  Warner,  26  Fed.  Rep.  616 174 

United  States  v.  Weitzel,  246  U.  S.  533 175 

United  States  v.  Wilson,  176  Fed.  Rep.  806 172,  173 

United  States  ex  rel.  Cond  v.  Barry,  36  Fed.  Rep.  246 56 

United  States  Natl.  Bank  v.  First  Natl.  Bank,  79  Fed.  Rep.  296 14,  71 

Upton  v.  Natl.  Bank  of  South  Reading,  120  Mass.  153 22 


Van  Allen  v.  Assessors,  3  Wall.  573 39,  135,  137,  139,  140 

Van  Lenven  v.  First  Natl.  Bank,  54  N.  Y.  671 12 

Van  Reed  v.  People's  Natl.  Bank,  198  U.  S.  554;  173  N.  Y.  314 188 

Van  Slyke  v.  State,  26  Wis.  655 140 

Venango  Natl.  Bank  v,  Taylor,  56  Pa.  St.  14 167 

W 

Waite  v.  Dowly,  94  U.  S.  527 141 

Walden  Natl.  Bank  v.  Birch,  130  N.  Y.  221 110 

Walsh  v.  United  States,  174  Fed.  Rep.  615 172 

Walker  v.  Windsor  Natl.  Bank,  56  Fed.  Rep.  76 185 

Washington  Natl.  Bank  v.  King  County,  9  Wash.  607 137 


xxii 

PAGE 

Washington  Natl.  Bank  v.  Eckels,  57  Fed.  Rep.  870 146,  148 

Watkins  v.  Natl.  Bank  of  Lawrence,  51  Kans.  254 145,  146 

Watt  v.  First  Natl.  Bank,  76  Minn.  458 121 

Weber  v.  Spokane  Natl.  Bank,  64  Fed.  Rep.  208,  reversing  50  Fed. 

Rep.  735 108 

Weckler  v.  First  Natl.  Bank  of  Hagerstown,  42  Md.  581 12 

Weitzel  v.  Brown,  224  Mass.  190 3,  62,  149,  152,  190 

Welles  v.  Graves,  41  Fed.  Rep.  459 162,  163,  164 

Welles  v.  Larrabee  et  al.,  36  Fed.  Rep.  866 60,  65 

Welles  v.  Stout,  38  Fed.  Rep.  807 63 

Western  Natl.  Bank  v.  Armstrong,  152  U.  S.  346 14 

Westervelt  v.  Mohrenstecher,  76  Fed.  Rep.  118 17 

Wheeler  v.  Union  Natl.  Bank,  96  U.  S.  785 124 

Wheelock  v.  Kost,  77  111.  296 60,  61,  148 

Whitbeck  v.  Mercantile  Bank,  127  U.  S.  193 136 

White  v.  Knox,  111  U.  S.  784 155 

Whitney  Natl.  Bank  v.  Parker,  41  Fed.  Rep.  402 135 

Wichita  Natl.  Bank  v.  Smith,  72  Fed.  Rep.  568 185 

Wickham  v.  Hull,  60  Fed.  Rep.  326 58,  186 

Wigert  v.  First  Natl.  Bank,  175  Fed.  Rep.  739 21 

Wild,  In  re,  Fed.  Case  No.  4173,  11  Blatchford  243 117 

Wiley  v.  First  Natl.  Bank  of  Brattleboro,  47  Vt.  546 11 

Wiley  v.  Starbuck,  44  Ind.  298 117,  123 

Willard  Mfg.  Co.  v.  Tierney,  130  N.  C.  611 188 

Williams  v.  American  Natl.  Bank,  85  Fed.  Rep.  376 43 

Williams  v.  Brady,  232  Fed.  Rep.  740 164,  165 

Williams  v.  Cobb,  219  Fed.  Rep.  663 37 

Williamson  v.  American  Bank,  109  Fed.  Rep.  36,  115  Fed.  Rep.  793 

63,  64,  147 

Winter  v.  Baldwin,  89  Ala.  483 35 

Witters  v.  Foster,  28  Fed.  Rep.  737 186 

Witters  v.  Sowles,  35  Fed.  Rep.  640;  38  Fed.  Rep.  700 59 

Wolverton  v.  Exchange  Natl.  Bank,  11  Wash.  94 117 

Woodward  v.  Ellsworth,  4  Colo.  580 140 

Woodward  v.  Old  Second  Natl.  Bank,  154  Mich.  459 130 

Wright  v.  First  Natl.  Bank,  Fed.  Case  No.  18,078,  8  Bliss.  243 122 

Wright  v.  Merchants'  Natl.  Bank,  Fed.  Case  No.  18,084 149 

Wylie  v.  Northampton  Bank,  119  U.  S.  361 11 

Wyman  v.  Citizens'  Natl.  Bank  of  Faribault,  29  Fed.  Rep.  734 106 

Wyman  v.  Wallace,  201  U.  S.  230 147 


xxiit 
Y 

PAGE 

Yardley  v.  Clothier,  49  Fed.  Rep.  337;  51  Fed.  Rep.  506 167 

Yates  v.  Jones  Natl.  Bank,  206  U.  S.  158;  240  U.  S.  541 164,  165 

Yakima  Natl.  Bank  v.  Knipe,  6  Wash.  348 191 

Yerkes  v.  Natl.  Bank  of  Port  Jervis,  69  N.  Y.  383 12,  14 

Young  v.  McKay,  50  Fed.  Rep.  394 36 

Young  v.  Wempke,  46  Fed.  Rep.  354 149 

Z 

Zinn  v.  Baxter,  65  Ohio  St.  341 163 


INDEX  TO  SECTIONS  OF  U.  S.  REVISED  STATUTES  AND 

ADDITIONAL  ACTS  RELATING  TO  NATIONAL 

AND   FEDERAL  RESERVE   BANKS 

SECTIONS  OF  U.  S.  REVISED  STATUTES 


U.  8. 

U.S. 

U.S. 

Revised 

Digest 

Revised 

Digest 

Page. 

Revised 

Digest 

Page. 

Sttitute 

Section. 

Page. 

statute 

Section. 

Statute 

Section. 

Section. 

Section. 

Section. 

324... 

2 

2 

5152.... 

47 

64 

5211.... 

127 

125 

325  . . . 

3 

2 

5153 

30 

44 

5212  .... 

128 

127 

326  .. . 

4 

2 

5154 

31 

45 

5213 .... 

129 

128 

327  .. . 

5 

3 

5155 

32 

47 

5214 .... 

136, 137 

131 

328  .. . 

6 

3 

5158 

56 

76 

5215.... 

139 

132 

329  .. . 

7 

3 

5161 

57 

76 

5216 .... 

140 

133 

330 .. . 

8 

4 

5162 

67 

79 

5217.... 

141 

133 

331  .. . 

9 

4 

5163 

68 

80 

5218 .... 

142 

133 

333... 

10 

5 

5164.-.. 

69 

80 

5219 .... 

144 

134 

380  .. . 

188 

189 

5165 

70 

80 

5220 .... 

149 

144 

736  .. . 

187 

189 

5166.... 

71 

81 

5221 .... 

150 

146 

884  .. . 

189 

189 

5167 

64,65,66 

78,  79 

5222  .... 

94 

91 

885  .. . 

190 

190 

5163 

24 

40 

5223 .... 

91 

89 

3583 .  . . 

179 

182 

5169 

25 

40 

5224  .... 

95 

92 

3584 . . . 

346 

386 

5170.... 

26 

41 

5225  .... 

97 

93 

3585  . . . 

347 

387 

5172.... 

76 

83 

5225  .... 

98 

93 

3587  . . . 

350 

387 

5173.... 

77 

84 

5227  .... 

99 

94 

3588  . . . 

351 

387 

5174.... 

79 

84 

5228  .... 

100 

95 

3589 . . . 

352 

387 

5175*... 

75 

82 

5229 .... 

101 

95 

3590 . . . 

353 

388 

5182 

81 

85 

5230 .... 

102 

95 

3620 . . . 

316 

345 

5183 

83 

86 

5231  .... 

103 

96 

3701 . . . 

146 

143 

5184 

84 

86 

5232  .... 

106 

97 

3347  . . . 

317 

346 

5187 

165 

169 

5233  .... 

107 

97 

5133... 

12 

8 

5188 

180 

182 

5234  .... 

152, 154 

147, 150 

5134... 

13 

8 

5189 

181 

183 

5235  .... 

155 

154 

5135 . . . 

14 

9 

5190 

109 

99 

5236 

156 

154 

6136 . . . 

15 

9 

5195 

88 

87 

5237  .... 

157 

156 

5137 . . . 

17 

20 

5196 

121 

114 

5238  .... 

158 

156 

5138  . . . 

20 

34 

5197 

125 

115 

5239  .... 

163 

161 

5139 . . . 

21 

34 

5198 

126 

118 

5240  .... 

131 

129 

5140 . . . 

22 

37 

5199  ... 

119 

113 

5241  .... 

135 

130 

5141 . . . 

23 

38 

5200 

113 

101 

5242  .... 

164,  186 

165,  187 

5142 . . . 

28 

42 

5201 

116 

109 

5243  .... 

182 

183 

5143 . . . 

29 

43 

5202 

114 

107 

5413  .... 

169 

176 

5144 . . . 

44 

54 

5203 

120 

114 

5415  .... 

170 

176 

5145... 

48 

65 

5204 

118 

112 

5430  .... 

171 

177 

5146 . . . 

49 

66 

5205 

117 

111 

5431  .... 

172 

179 

5147... 

50 

67 

5206 

122 

114 

5432  .... 

173 

179 

5148... 

51 

69 

5207 

166 

170 

5433  .... 

174 

179 

5149 . . . 

52 

69 

5208 

115 

108 

5434  .... 

175 

180 

5150... 

53 

70 

5209 

167 

170 

6437  .... 

176 

180 

5151 . . . 

45 

56 

5210.... 

124 

115 

5497.... 

177 

181 

(*  Repealed) 


ACTS   RELATING  TO  NATIONAL  AND  FEDERAL 
RESERVE    BANKS 


Act 

Digest  Section 

Page 

June  20,  1874 

1 

1 

June  20,  1874 

78 

84 

June  20,  1874 

89 

87 

June  20,  1874 

91 

89 

June  20,  1874 

96 

93 

June  20,  1874 

104 

96 

June  23,  1874 

108 

98 

Jan.  14,  1875 

80 

85 

Feb.  8,  1875 

147 

143 

Feb.  8,  1875 

148 

143 

Feb.  18,  1875 

8 

4 

Feb.  18,  1875 

95 

92 

Feb.  18,  1875 

100 

95 

June  30,  1876 

117 

111 

June  30,  1876 

123 

115 

June  30,  1876 

151 

147 

June  30,  1876 

153 

148 

June  30,  1876 

162 

158 

Feb.  27,  1877 

79 

84 

Feb.  27,  1877 

97 

93 

Feb.  27,  1877 

127 

125 

Feb.  27,  1877 

Sec.  1 

316 

345 

Feb.  28,  1878 

Sec.  1 

348 

387 

March  1,  1879 

143 

133 

June  9,  1879 

Sec.  3 

349 

387 

Feb.  26,  1881 

130 

128 

July  12,  1882 

Ch.  290 

Sec.  1 

37 

50 

July  12,  1882 

Sec.  3 

40 

51 

July  12,  1882 

Sec.  4 

41 

51 

July  12,  1882 

Sec.  5 

42 

52 

July  12,  1882 

Sec.  7 

43 

53 

July  12,  1882 

92 

90 

July  12,  1882 

93 

90 

July  12,  1882 

105 

96 

July  12,  1882 

168 

175 

July  12,  1882 

183 

184 

XIT 


xxvi 


Act 

Digest 

Section 

Page 

July  12,  1882  Sec.  12 

355 

388 

March  29,  1886 

159 

157 

March  29,  1886 

160 

158 

March  29,  1886 

161 

158 

May  1,  1886 

Ch  ' 

73  Sec. 

1 

27 

41 

May  1,  1886 

Ch  ' 

73  Sec. 

2 

34 

49 

May  1,  1886 

Ch  ' 

73  Sec. 

3 

35 

49 

May  1,  1886 

Ch  73  Sec. 

4 

36 

49 

Aug.  13,  1888 

184 

185 

July  14,  1890 

90 

88 

July  28,  1892 

82 

85 

Aug.  13,  1894 

145 

142 

March  2,  1897 

162 

158 

March  14,  1900 

Sec. 

1 

329 

377 

March  14,  1900 

Sec. 

2 

330 

377 

March  14,  1900 

Sec. 

3 

357 

389 

March  14,  1900 

Sec. 

4 

331 

379 

March  14,  1900 

Sec. 

5 

332 

379 

March  14,  1900 

Sec. 

6 

333 

380 

March  14,  1900 

Sec. 

7 

334 

381 

March  14,  1900 

Sec. 

8 

335 

381 

March  14,  1900 

Sec. 

9 

336 

382 

March  14,  1900 

Sec. 

10 

20 

34 

March  14,  1900 

Sec. 

11 

59,  60 

.  61 

77 

March  14,  1900 

Sec. 

12 

58,  72,  73,  74 

,  75 

76,  81,  82 

March  14,  1900 

Sec. 

13 

137 

131 

March  14,  1900 

Sec. 

14 

344 

385 

March  3,  1901 

Ch  871 

30 

44 

April  12,  1902 

Ch  503 

38 

50 

April  28,  1902 

10,  11 

5,  6 

Feb.  28,  1905 

49 

66 

Dec.  21,  1905 

62, 

138 

78,  132 

Jan.  22,  1906 

113 

101 

Jan.  26,  1907 

178 

181 

March  4,  1907 

92 

90 

March  4,  1907 

Sec. 

1 

333 

380 

March  4,  1907 

Sec. 

2 

345 

386 

March  4,  1907 

Sec. 

3 

30 

44 

May  27,  1908 

317 

346 

March  4,  1909 

169, 

170, 

171,  172, 

173,  176, 

177, 

179,  180,  181, 

r, 

74, 

175, 

176,  177, 

179,  182, 

183 

180, 

181 

March  4,  1909 

Sec. 

225 

318 

347 

xxvii 

Act  Digest  Section  Page 

March  4,  1909     Sec.  87  323  360 


June 

i  25 

,  1910 

Sec 

.  8 

327 

S75 

June 

i  25, 

1910 

Sec. 

10 

328 

375 

March  5 

!,  1911 

63 

78 

March  1 

!,  1911 

333 

380 

March  2 

!,  1911 

185 

187 

Dec. 

23, 

1913 

Sec. 

1 

192 

198 

Dec. 

23, 

1913 

Sec. 

2 

193, 
198, 

194, 
199, 

195, 
200, 

198, 
201 

197, 

198, 

200, 

201, 

202, 

203 

Dec. 

23, 

1913 

Sec. 

3 

202 

203 

Dec. 

23, 

1913 

Sec. 

4 

203, 
208, 

204, 
209, 

205, 
210, 

206, 
211, 

207, 
212 

204, 
210, 

205, 
211 

206, 

207, 

208, 

Dec. 

23, 

1913 

Sec. 

5 

213 

212 

Dec. 

23, 

1913 

Sec. 

6 

213 

212 

Dec. 

23, 

1913 

Sec. 

7 

214, 

215 

216, 

218 

Dec. 

23, 

1913 

Sec. 

8 

31 

45 

Dec. 

23, 

1913 

Sec. 

9 

217 

218 

Dec. 

23, 

1913 

Sec. 

10 

2,  218,  : 

219, 

220, 

221, 

2, 

226, 

227, 

228 

222, 

223 

Dec. 

23, 

1913 

Sec. 

11 

225, 
230, 
235, 

226, 
231, 
236, 

227, 
232, 
237 

228, 
233, 

229, 
234, 

229, 

230, 

231, 

232, 

237 

Dec. 

23, 

1913 

Sec. 

12 

238 

238 

Dec. 

23, 

1913 

Sec. 

13 

19, 

114, 

239, 

240, 

241, 

28, 

107, 

239, 

240, 

249. 

242, 

243, 

244, 

246, 

,  248 

252, 

253, 

259, 

260, 

261 

Dec. 

23, 

1913 

Sec. 

14 

249, 
254 

250, 

251, 

252, 

253, 

265, 

268, 

269, 

273, 

274 

Dec. 

23, 

1913 

Sec. 

15 

255 

275 

Dec. 

23, 

1913 

Sec. 

16 

256, 

257, 

258, 

259, 

260, 

276, 

277, 

278, 

279, 

280, 

261, 

262, 

263, 

264, 

,  265 

281, 

282, 

283 

Dec. 

23, 

1913 

Sec. 

17 

54 

74 

Dec. 

23, 

1913 

Sec. 

18 

55, 

269, 

270, 

271, 

272 

74, 

290, 

291, 

292 

Dec. 

23, 

1913 

Sec. 

19 

273, 
279, 

274, 
280, 

275, 
281 

276, 

278, 

292, 
300 

294, 

295, 

296, 

297, 

Dec. 

23, 

1913 

Sec. 

20 

282 

300 

Dec. 

23, 

1913 

Sec. 

21 

131 

,  285 

,  286 

,  287 

129, 

300, 

301 

Dec. 

23, 

1913 

Sec. 

22 

288 

301 

Dec. 

23, 

1913 

Sec. 

23 

46 

57 

Dec. 

23, 

1913 

Sec. 

24 

18 

23 

Dec. 

23, 

1913 

Sec. 

25 

291, 
296 

292, 

293, 

294, 

295, 

304 

,  305, 

,  306, 

307 

Dec.  23,  1913     Sec.  26  298  327 

Dec.  23,  1913     Sec.  27  299  327 


xxviii 


Act 

Digest 

Section 

Page 

Dec.  23,  1913 

Sec.  28 

29 

43 

Dec.  23,  1913 

Sec.  29 

301 

327 

Dec.  23,  1913 

Sec.  30 

302 

328 

Aug.  15,  1914 

278 

,  279 

,  280 

,  281 

296 

,  297,  300 

Oct.  15,  1914   (Clayton 

Act) 

Sec.  8 

304, 

305, 

306, 

307, 

308 

333, 

334, 

336, 

338,  340 

Oct.  15,  1914 

Sec.  11 

309, 
314, 

310, 
315 

311, 

312, 

313, 

341, 

,  342, 

343,  344 

March  3,  1915 

239 

239 

May  15,   191G 

154, 

,  307 

150,  338 

May  18,  1916 

Sec.  2 

325 

361 

May  18,  1916 

Sec.  17 

326 

375 

June  12,  1916 

333 

380 

July  17,  1916 

Sec.  6 

321 

349 

Sept.  7,  1916 

18, 

19,   114, 

237, 

239, 

23, 

28,  : 

L07, 

237,   239, 

240, 

241, 

242, 

243, 

244, 

240, 

249, 

252, 

253,  259, 

246, 

248, 

254, 

257, 

291, 

260, 

261, 

274, 

277,  304, 

292, 

293, 

294, 

295, 

296 

305, 

306, 

307 

April  24,  1917 

Sec.  7 

319, 

320 

348 

June  21,  1917 

202 

203 

June  21,  1917 

Sec.  2 

209 

210 

June  21,  1917 

Sec.  3 

217 

218 

June  21,  1917 

Sec.  4 

239 

239 

June  21,  1917 

Sec.  5 

243 

253 

June  21,  1917 

See.  6 

254 

274 

June  21,  1917 

Sec.  7 

257, 
262 

258, 

259, 

260, 

261, 

277, 

278, 

279, 

280,  281 

June  21,  1917 

Sec.  8 

266 

289 

June  21,  1917 

Sec.  9 

54 

74 

June  21,  1917 

Sec.  10 

273, 
278, 

274, 
279, 

275, 
280, 

276, 
281 

277, 

292, 
300 

294, 

295, 

296,  297, 

June  21,  1917 

Sec.  11 

288 

301 

Oct.  5,  1917 

75 

82 

April  5,  1918 

114 

107 

April  23,  1918 

Sec.  1 

337 

382 

April  23,  1918 

Sec.  2 

338 

382 

April  23,  1918 

Sec.  3 

339 

383 

April  23,  1918 

Sec.  4 

340 

383 

April  23,  1918 

Sec.  5 

341 

384 

April  23,  1918 

Sec.  6 

342 

384 

April  23,  1918 

Sec.  7 

342 

384 

April  23,  1918 

Sec.  8 

342 

384 

April  23,  1918 

Sec.  9 

343 

385 

Act 

May  22,  1918 

Sept.  24,  1918 

Sept.  26,  1918 

Sept.  26,  1918  Sec.  1 

Sept.  26,  1918  Sec.  2 

Sept.  26,  1918  Sec.  3 

Sept.  26,  1918  Sec.  4 

Sept.  26,  1918  Sec.  5 

Nov.  7,  1918 

March  3,  1919 

March  3,  1919  Sec.  1 

March  3,  1919  Sec.  2 

March  3,  1919  Sec.  3 

Sept.  17,  1919 

Oct.  22,  1919 

Dec.  24,  1919 

Jan.  13,  1920 

April  13,  1920 


Digest 

Section 

Page 

16 

19 

113 

101 

115,  167, 

168 

109,  170, 

175 

208 

208 

235 

232 

263 

282 

275, 

276 

295 

288 

301 

33 

47 

76 

83 

214 

216 

219 

226 

237 

237 

292, 

293 

305, 

306 

113, 

114 

101, 

107 

297, 

356 

307, 

389 

81 

85 

253 

274 

PART  ONE 

THE  NATIONAL  BANK  ACT,  AMENDMENTS 
AND  SUPPLEMENTARY  ACTS 

WITH  ANNOTATIONS 


CHAPTER  I. 


COMPTROLLER  OP  THE  CURRENCY. 


Section  1.  Title  of  Act. 

2.  Bureau  of  Comptroller  of  the  Currency. 

3.  Comptroller  of  the  Currency. 

4.  Oath  and  Bond  of  Comptroller. 

5.  Deputy  Comptroller;  duties,  etc. 

6.  Clerks. 

7.  Prohibition  Against  Interest  in  National  Banks. 

8.  Seal  of  Office. 

9.  Offices,  Vaults,  etc.,  for  Bureau. 

10.  Annual  Report  of  Comptroller. 

11.  Furnishing  of  List  of  Clerks,  etc. 

§  1.  Title  of  Act. — The  act  entitled  "An  act  to  provide  a 
National  currency  secured  by  a  pledge  of  United  States  bonds, 
and  to  provide  for  the  circulation  and  redemption  thereof,"  ap- 
proved June  third,  eighteen  hundred  and  sixty-four,  shall  here- 
after be  known  as  the  "National  Bank  Act."  (Act  June  20,  1874, 
Ch.  343,  Sec.  1,  18  Stat.  L.  123.) 

1 


§  2.  Eureau  of  Comptroller  of  the  Currency. — There  shall  be  in 
the  Department  of  the  Treasury  a  bureau  charged  with  the  execu- 
tion of  all  laws  passed  by  Congress  relating  to  the  issue  and  regu- 
lation of  National  currency  secured  by  United  States  bonds  and, 
under  the  general  supervision  of  the  Federal  Eeserve  Board,  of  all 
Federal  reserve  notes,  the  chief  officer  of  which  bureau  shall  be 
called  the  Comptroller  of  the  Currency  and  shall  perform  his 
duties  under  the  general  directions  of  the  Secretary  of  the  Treas- 
ury. (Eev.  Stat.  U.  S.  Sec.  324,  as  amended  by  Sec.  10,  Act  Dec. 
23,  1913,  38  Stat.  L.  2G0.) 

While  the  construction  of  National  banking  laws  by  the  Comptroller 
of  the  Currency  is  persuasive,  and  entitled  to  careful  consideration, 
yet  a  Court,  if  satisfied  that  such  construction  is  error,  will  not  follow 
it.  (Deweese  v.  Smith,  106  Fed.  Rep.,  438.)  And  where  the  meaning 
of  the  act  is  clear,  the  construction  placed  thereon  by  the  Comptroller 
can  not  be  considered.     (Studebaker  v.  Perrin,  184  U.  S.,  252.) 

The  Federal  Trade  Commission  has  no  jurisdiction  over  banks. 

§  3.  Comptroller  of  the  Currency — Appointment — Term  of  Office 
— Salary. — The  Comptroller  of  the  Currency  shall  be  appointed  by 
the  President,  on  the  recommendation  of  the  Secretary  of  the 
Treasury,  by  and  with  the  advice  and  consent  of  the  Senate,  and 
shall  hold  his  office  for  the  term  of  five  years  unless  sooner  re- 
moved by  the  President,  upon  reasons  to  be  communicated  by  him 
to  the  Senate ;  and  he  shall  be  entitled  to  a  salary  of  five  thousand 
dollars  a  year.     (Eev.  Stat.  U.  S.  Sec.  325.) 

For  compensation  of  Comptroller  as  member  of  Reserve  Board  see 
Sec.  10  Federal  Reserve  Act,  page  226. 

§  4.  Oath  and  Bond  of  Comptroller. —  The  Comptroller  of  the 
Currency  shall,  within  fifteen  days  from  the  time  of  notice  of 
his  appointment,  take  and  subscribe  the  oath  of  office;  and  he 
shall  give  to  the  United  States  a  bond  in  the  penalty  of  one  hun- 
dred thousand  dollars,  with  not  less  than  two  responsible  sureties, 
to  be  approved  by  the  Secretary  of  the  Treasury,  conditioned  for 
the  faithful  discharge  of  the  duties  of  his  office.  (Eev.  Stat.  U.  S. 
Sec.  326.) 

The  bond  of  a  surety  company  is  now  accepted. 


§  5.  Deputy  Comptroller:  Duties,  Etc. —  There  shall  be  in  the 
Bureau  of  the  Comptroller  of  the  Currency  a  Deputy  Comptroller 
of  the  Currency,  to  be  appointed  by  the  Secretary,  who  shall  be 
entitled  to  a  salary  of  two  thousand  five  hundred  dollars  a  year, 
and  who  shall  possess  the  power  and  perform  the  duties  attached 
by  law  to  the  office  of  Comptroller  during  a  vacancy  in  the  office 
or  during  the  absence  or  inability  of  the  Comptroller.  The  Deputy 
Comptroller  shall  also  take  the  oath  of  office  prescribed  by  the 
Constitution  and  laws  of  the  United  States,  and  shall  give  a  like 
bond  in  the  penalty  of  fifty  thousand  dollars.  (Eev.  Stat.  U.  S. 
Sec.  327.) 

Salary. — By  the  appropriation  act  of  Feb.  3,  1905,  and  all  subse- 
quent acts  the  salary  of  the  Deputy  Comptroller  has  been  fixed  at  $3,500. 

Judicial  Notice. — The  court  will  take  judicial  notice  of  the  fact  that 
a  certain  person  was  on  a  certain  day  the  Deputy  Comptroller  of  the 
Currency;  and  where  he  has  signed  a  certificate  as  "Acting  Comp- 
troller" the  court  will  assume  that  at  the  date  of  such  certificate  he 
was  authorized  to  exercise  the  powers  and  discharge  the  duties  of 
Comptroller.  (Keyser  v.  Hitz,  133  U.  S.,  438;  V/eitzel  v.  Brown,  224 
Mass.   190.) 

Additional  Deputy  Comptroller. — By  the  appropriation  act  of  May 
22,  1908,  provision  was  made  for  an  additional  Deputy  Comptroller,  at 
a  salary  of  $3,000,  who  shall  possess  the  power  and  perform  the  duties 
attached  by  law  to  the  office  of  Comptroller  during  a  vacancy  in  the 
office  of  Comptroller  and  Deputy  Comptroller,  or  during  the  absence  or 
inability  of  the  Comptroller  and  the  Deputy  Comptroller,  and  said 
assistant  Deputy  Comptroller  shall  give  a  like  bond  in  the  penalty  of 
$50,000. 

§  6.  Clerks. — The  Comptroller  of  the  Currency  shall  employ, 
from  time  to  time,  the  necessary  clerks,  to  be  appointed  and  clas- 
sified by  the  Secretary  of  the  Treasury,  to  discharge  such  duties 
as  the  Comptroller  shall  direct.     (Rev.  Stat.  U.  S.  Sec.  328.) 

§  7.  Prohibition  Against  Interest  in  National  Banks. —  It  shall 
not  be  lawful  for  the  Comptroller  or  the  Deputy  Comptroller  of 
the  Currenc}r,  either  directly  or  indirectly,  to  be  interested  in  any 
association  issuing  National  Currency  under  the  laws  of  the  United 
States.    (Rev.  Stat.  U.  S.  Sec.  329.) 


For  prohibition  against  interest  in  State  Bank  or  Trust  CoTnpany 
see  Sec.  10  Federal  Reserve  Act,  page  227. 

§  8.  Seal  of  Office.— The  seal  devised  by  the  Comptroller  of 
the  Currency  for  his  office,  and  approved  by  the  Secretary  of  the 
Treasury,  shall  continue  to  be  the  seal  of  office  of  the  Comptroller, 
and  may  be  renewed  when  necessary.  A  description  of  the  seal, 
with  an  impression  thereof,  and  a  certificate  of  approval  by  the 
Secretary  of  the  Treasury,  shall  be  filed  in  the  office  of  the  Sec- 
retary of  State,  (liev.  Stat.  U.  S.  Sec.  330  as  amended  by  Act, 
Feb.  18,  1875,  Chap.  80,  18  Stat.  L.  317.) 

§  9.  Offices,  Vaults,  etc.,  for  Bureau. —  There  shall  be  assigned 
from  time  to  time,  to  the  Comptroller  of  the  Currency,  by  the 
Secretary  of  the  Treasury,  suitable  rooms  in  the  Treasury  build- 
ing for  conducting  the  business  of  the  Currency  Bureau,  con- 
taining safe  and  secure  fire-proof  vaults,  in  which  the  Comptroller 
shall  deposit  and  safely  keep  all  the  plates  not  necessarily  in  the 
possession  of  engravers  or  printers,  and  other  valuable  things  be- 
longing to  his  Department;  and  the  Comptroller  shall  from  time 
to  time  furnish  the  necessary  furniture,  stationery,  fuel,  lights, 
and  other  proper  conveniences  for  the  transaction  of  the  business 
of  his  office.    (Eov.  Stat.  IT.  S.  Sec.  331.) 

§  10.  Annual  Report  of  Comptroller. —  The  Comptroller  of 
the  Currency  shall  make  an  annual  report  to  Congress,  at  the  com- 
mencement of  its  session,  exhibiting — 

First.  A  summary  of  the  state  and  condition  of  every  associa- 
tion from  which  reports  have  been  received  the  preceding  year,  at 
the  several  dates  to  winch  such  reports  refer,  with  an  abstract  of 
the  whole  amount  of  banking  capital  returned  by  them,  of  the 
whole  amount  of  their  debts  and  liabilities,  the  amount  of  circu- 
lating notes  outstanding,  and  the  total  amount  of  means  and  re- 
sources, specifying  the  amount  of  lawful  money  held  by  them  at 
the  times  of  their  several  returns,  and  such  other  information  in 
relation  to  such  associations  as,  in  his  judgment,  may  be  useful. 

Second.   A  statement  of  the  associations  whose  business  has  been 


closed  during  the  year,  with  the  amount  of  their  circulation  re- 
deemed and  the  amount  outstanding. 

Third.  Any  amendment  to  the  laws  relative  to  banking  by 
which  the  system  may  be  improved  and  the  security  of  the  holders 
of  its  notes  and  other  creditors  may  be  increased. 

Fourth.  A  statement  exhibiting  under  appropriate  heads  the 
resources  and  liabilities  and  condition  of  the  banks,  banking  com- 
panies, and  savings  banks  organized  under  the  laws  of  the  several 
States  and  Territories;  such  information  to  be  obtained  by  the 
Comptroller  from  the  reports  made  by  such  banks,  banking  com- 
panies, and  savings  banks  to  the  legislatures  or  officers  of  the  differ- 
ent States  and  Territories,  and,  where  such  reports  can  not  be  ob- 
tained, the  deficiency  to  be  supplied  from  such  other  authentic 
sources  as  may  be  available. 

Fifth.  The  names  and  compensation  of  the  clerks  employed  by 
him,  and  the  whole  amount  of  the  expense  of  the  banking  de- 
partment during  the  year.  (Rev.  Stat.  U.  S.  Sec.  333)  ;  expenses 
incurred  during  each  }rear,  in  liquidation  of  each  failed  National 
bank  separately.  (Sec.  12,  Act.  April  28,  1902,  32  Stat.  L.  138.) 

How  Copies  to  be  Obtained. — The  first  report  of  the  Comptroller  of 
the  Currency  was  made  for  the  year  1863  by  the  Hon.  Hugh  Mc- 
Culloch,  the  first  Comptroller.  The  earlier  reports  are  out  of  print,  and 
those  of  some  of  the  later  years  also,  but  copies  of  such  as  are  on  hand 
and  can  be  spared  may  be  obtained  on  application  to'  the  Comptroller 
of  the  Currency  by  bankers  and  others  who  are  interested  In  banking 
matters. 

Repobt  to  be  Pbin-ted. — By  Act  January  12,  1S95,  Ch.  23  (28  Stat. 
L.  616),  as  amended  by  Pub.  Res.  25,  March  4,  1907  (34  Stat.  L, 
1425),  it  is  provided  that  there  shall  be  printed  each  year  thirteen 
thousand  copies  of  the  Report  of  the  Comptroller  of  the  Currency,  one 
thousand  for  the  Senate,  two  thousand  for  the  House,  and  ten  thousand 
for  distribution  by  the  Comptroller. 

§  11.  Furnishing  of  List  of  Clerks,  Examiners,  Receivers,  etc. 
— That  for  the  fiscal  year  of  nineteen  hundred  and  two  and  there- 
after, a  full  and  complete  list  of  all  officers,  agents,  clerks,  and 
other  employes  of  the  office  of  the  Comptroller  of  the  Currency, 
including  bank  examiners,  receivers  and  attorneys  for  receivers, 


and  clerks  employed  by  such  examiners  and  receivers,  or  any  other 
person  connected  with  the  work  of  said  office  in  Washington  or 
elsewhere,  whoso  salary  or  compensation  is  paid  from  the  Treas- 
ury of  the  United  States  or  assessed  against  or  collected  from 
existing  or  failed  banks  under  their  supervision  or  control,  shall 
be  transmitted  to  the  Secretary  of  the  Interior  in  accordance  with 
the  provision  of  an  Act  of  Congress  approved  January  twelfth, 
eighteen  hundred  and  eighty-five,  relating  to  the  Official  Eegister : 
And  provided  further,  That  the  Comptroller  of  the  Currency  is 
hereby  directed  to  include  in  Ms  Annual  Eeport  to  the  Speaker  of 
the  House  of  Eepresentatives,  expenses  incurred  during  each  year, 
in  liquidation  of  each  failed  national  bank  separately.  (Act, 
April  28,  1902;  32  Stat.  L.,  138.) 


CHAPTER  II. 

Organization  and  Powers  of  National  Banks. 

Section  12.  Who  May  Form  National  Banking  Associations — Ar- 
ticles of  Association. 

13.  Organization  Certificate. 

14.  Acknowledgment  of  Organization  Certificate. 

15.  Corporate  Powers  of  Associations. 

16.  Subscriptions  to  American  National  Eed  Cross. 

17.  Limitations  as  to  Eeal  Estate  and  Mortgages. 

18.  Loans  on  Eeal  Estate  by  National  Banks. 

19.  Power  of  National  Banks  as  Insurance  Agents. 

20.  Amount  of  Capital  Eequired. 

21.  Par  Value  of  Stock — Transfers — Stockholders'  Eights 

and  Liabilities. 

22.  When  Capital  Stock  Must  be  Paid  In. 

23.  Failure  to  Pay  Installments  on  Stock — Sale  of  Stock 

— Eestoring  Capital  so  Eeduced. 

24.  Comptroller  to  Determine  if  Association  is  Entitled 

to  Commence  Business. 

25.  Certificate  of  Authority  to  Commence  Business. 

26.  Publication  of  Comptrollers  Certificate. 

27.  Increase  of  Capital  Stock. 

28.  When  Increase  of  Capital  Stock  Becomes  Valid. 

29.  Seduction  of  Capital  Stock. 

30.  Depositaries  of  Public  Moneys. 

31.  Conversion  of  State  into  National  Banks. 

32.  Same  Subject — State  Banks  having  Branches. 

33.  Consolidation  of  National  Banking  Associations. 

34.  Change  of  Name  and  Location. 

35.  Same  Subject — Continuance  of  Liabilities. 

36.  Same  Subject. 

7 


8 

37.  Extension  of  Corporate  Existence. 

38.  Same  Subject — Further  Extension. 

39.  Amendment  of  Articles  in  Case  of  Change. 

40.  Special  Examination  of  Extended  Bank — Certificate 

of  Comptroller. 

41.  Privileges,  Liabilities,  etc.,  of  Extended  Banks. 

42.  Withdrawal  of  Shareholders ;  Preference  in  Allotment. 

43.  Banks  not  Extending — Continuance  of  Franchise  for 

Purpose  of  Liquidation. 

§  12.  Who  May  Form  National  Banking  Associations — Articles 
of  Association. — Associations  for  carrying  on  the  business  of  bank- 
ing under  this  Title  may  be  formed  by  any  number  of  natural 
persons,  not  less  in  any  case  than  five.  They  shall  enter  into  articles 
of  association,  which  shall  specify  in  general  terms  the  object  for 
which  the  association  is  formed,  and  may  contain  any  other  pro- 
visions, not  inconsistent  with  law,  which  the  association  may  see 
fit  to  adopt  for  the  regulation  of  its  business  and  the  conduct  of  its 
affairs.  These  articles  shall  be  signed  by  the  persons  uniting  to 
form  the  association,  and  a  copy  of  them  3hall  be  forwarded  to 
the  Comptroller  of  the  Currency,  to  be  filed  and  preserved  in  his 
office.     (Eev.  Stat.  IT.  S.  Sec.  5133.) 

For  full  details  how  to  proceed  in  the  organization  of  a  National 
Bank,  with  form  of  articles  of  association,  etc.,  see  §360  ff. 

§  13.  Organization  Certificate. — The  persons  uniting  to  form 
such  an  association  shall,  under  their  hands,  make  an  organization 
certificate,  which  shall  specifically  state: 

First.  The  name  assumed  by  such  association ;  which  name  shall 
be  subject  to  the  approval  of  the  Comptroller  of  the  Currency. 

Second.  The  place  where  its  operations  of  discount  and  deposit 
are  to  be  carried  on,  designating  the  State,  Territory,  or  district, 
and  the  particular  county  and  city,  town,  or  village. 

Third.  The  amount  of  capital  stock  and  the  number  of  shares 
into  which  the  same  is  to  be  divided. 

Fourth.  The  names  and  places  of  residence  of  the  shareholders 
and  the  number  of  shares  held  by  each  of  them. 


Fifth.  The  fact  that  the  certificate  is  made  to  enable  such 
persons  to  avail  themselves  of  the  advantages  of  this  Title.  (Eev. 
Stat.  U.  S.  Sec.  5134.) 

Place  of  Location — How  Designated. — The  provision  of  law  requir- 
ing that  the  place  where  the  business  is  to  be  carried  on  shall  be  stated 
in  the  organization  certificate  refers  to  the  town  or  city,  and  not  to 
the  particular  building  or  street  number.  (McCormick  v.  Market  Nat. 
Bank  of  Chicago,  162  111.,  100.) 

For  authority  to  change  names  or  locations  see  act  May  1,  1886, 
$32. 

§  14.  Acknowledgment  of  Organization  Certificate. — The  or- 
ganization certificate  shall  be  acknowledged  before  a  judge  of  some 
court  of  record,  or  notary  public ;  and  shall  be,  together  with  the 
acknowledgment  thereof,  authenticated  by  the  seal  of  such  court, 
or  notary,  transmitted  to  the  Comptroller  of  the  Currency,  who 
shall  record  and  carefully  preserve  the  same  in  his  office.  (Eev. 
Stat.  U.  S.  Sec.  5135.) 

For  form  of  certificate  see  $385. 

§  15.  Corporate  Powers  of  Associations.— -Upon  duly  making 
and  filing  articles  of  association  and  an  organization  certificate, 
the  association  shall  become,  as  from  the  date  of  the  execution  of 
its  organization  certificate,  a  body  corporate,  and  as  such,  and  in 
the  name  designated  in  the  organization  certificate,  it  shall  have 
power — 

First.  To  adopt  and  use  a  corporate  seal. 

•Second.  To  have  succession  for  the  period  of  twenty  years  from 
its  organization,  unless  it  is  sooner  dissolved  according  to  the 
provisions  of  its  articles  of  association,  or  by  the  act  of  its  share- 
holders owning  two-thirds  of  its  stock,  or  unless  its  franchise  be- 
comes forfeited  by  some  violation  of  law. 

Third.    To  make  contracts. 

Fourth.  To  sue  and  be  sued,  complain  and  defend,  in  any  court 
of  law  and  equity,  as  fully  as  natural  persons. 

Fifth.    To  elect  or  appoint  directors,  and  by  its  board  of  direc- 


10 

tors  to  appoint  a  president,  vice-president,  cashier,  and  other  offi- 
cers, define  their  duties,  require  bonds  of  them  and  fix  the  penalty 
thereof,  dismiss  such  officers  or  any  of  them  at  pleasure,  and  ap- 
point others  to  fill  their  places. 

Sixth.  To  prescribe,  by  its  board  of  directors,  by-laws  not  in- 
consistent with  law,  regulating  the  manner  in  which  its  stock  shall 
be  transferred,  its  directors  elected  or  appointed,  its  officers  ap- 
pointed, its  property  transferred,  its  general  business  conducted, 
and  the  privileges  granted  to  it  by  law  exercised  and  enjoyed. 

Seventh.  To  exercise  by  its  board  of  directors,  or  duly  author- 
ized officers  or  agents,  subject  to  law,  all  such  incidental  powers 
as  shall  be  necessary  to  carry  on  the  business  of  banking;  by  dis- 
counting and  negotiating  promissory  notes,  drafts,  bills  of  ex- 
change, and  other  evidences  of  debt;  by  receiving  deposits;  by 
buying  and  selling  exchange,  coin,  and  bullion;  by  loaning  money 
on  personal  security;  and  by  obtaining,  issuing,  and  circulating 
notes  according  to  the  provisions  of  this  Title. 

But  no  association  shall  transact  any  business  except  such  as 
is  incidental  and  necessarily  preliminary  to  its  organization  until 
it  has  been  authorized  by  the  Comptroller  of  the  Currency  to  com- 
mence the  business  of  banking.     (Eev.  Stat.  XJ.  S.  Sec.  5136.) 

Note. — See  §25  and  §26,  post,  relating  to  issuing  and  publishing  of 
certificate  authorizing  association  to  begin  business. 

For  power  of  a  National  bank  to  act  as  trustee,  executor,  adminis- 
trator, etc.,  see  Sec.  11   (k)    Federal  Reserve  Act,  §235. 

For  power  of  a  National  bank  to  establish  branches  in  foreign  coun- 
tries, see  Sec.  25  of  Federal  Reserve  Act,  §291. 

For  powers  of  a  National  bank  regarding  acceptances,  see  Sec.  13 
of  Federal  Reserve  Act,  §243. 

Banking  Powers. — The  enumeration  of  powers  in  the  seventh  sub- 
division of  this  section  merely  constitutes  the  usual  formula  descrip- 
tive of  the  banking  business,  and  is  based  on  the  model  New  York 
banking  act  of  1838.  National  banks  can  not  only  exercise  the  prin- 
cipal powers  expressly  enumerated  but  those  which  are  reasonably 
implied,  such  as  the  business  of  making  collections.     The  banks  can 


11 

also  exercise  such  powers  as  are  properly  incidental  to  the  principal 
features  enumerated  in  the  act  or  implied  therefrom,  and  can  make 
any  contracts  which  legitimately  appertain  to  the  business  of  banking 
as  defined  by  the  statute.  (Logan  Co.  Nat.  Bank  v.  Townsend,  139 
U.  S.,  67,  73;  Pattison  v.  Syracuse  Nat.  Bank,  80  N.  Y.,  82.) 

Deposits. — National  banks  can  not  only  receive  general  deposits 
but  can  contract  as  to  the  parties  to  whom  they  shall  be  repaid. 
(Sykes  v.  Canton  First  Nat.  Bank,  2  S.  D.,  242.)  They  may  receive 
deposits  of  the  public  funds  of  a  city,  agree  to  pay  interest  thereon 
and  give  bond  for  their  security.  (Interstate  Nat.  Bank  v.  Ferguson, 
48  Kan.,  732.) 

Special  Deposits. — National  banks  can  receive  special  deposits,  in- 
cluding deposits  of  bonds  and  securities  for  safe-keeping,  either  for 
a  compensation  or  gratuitously;  but  not,  for  example,  a  stock  of  mer- 
chandise to  be  stored  in  the  rear  of  the  banking-room.  (National 
Bank  v.  Graham,  100  U.  S.,  699;  Pattison  v.  Syracuse  Nat.  Bank,  supra; 
First  Nat.  Bank  v.  Strang,  138  111.,  347;  Am.  Nat.  Bank  v.  Adams,  44 
Okla.,  129.) 

For  liability  of  National  banks  for  loss  of  special  deposits,  see  First 
Nat.  Bank  v.  Ocean  Nat.  Bank,  60  N.  Y.,  278;  Wiley  v.  First  Nat.  Bank, 
47  Vt.,  546;  Pattison  v.  Syracuse  Nat.  Bank,  supra;  Chattahoochee  Nat. 
Bank  v.  Schley,  58  Ga.,  360;  National  Bank  v.  Graham,  100  U.  S.,  699; 
Leach  v.  Hale,  31  la.,  69;  Wylie  v.  Northampton  Bank,  119  U.  S.,  361; 
Coffey  v.  Nat.  Bank  of  Mo.,  46  Mo.,  140. 

Deposit  as  Stakeholder. — A  National  bank  may  receive  the  deposit 
of  a  fund  in  controversy  to  abide  the  event  of  a  litigation  or  award,  or 
to  be  payable  upon  a  contingency  to  some  person  other  than  the  de- 
positor. (Bushnell  v.  Chatauqua  County  National  Bank,  74,  N.  Y., 
290.    But  see  American  National  Bank  v.  Adams,  44  Okla.,  129.) 

Savings  Deposits. — Under  the  broad  authority  to  "receive  deposits" 
conferred  by  the  National  Bank  Act  there  appears  to  be  no  reason 
why  a  National  bank  may  not  receive  savings  accounts  under  rules 
similiar  to  those  adopted  by  savings  banks  respecting  the  time  and 
manner  of  withdrawal,  interest,  etc.  Such  deposits,  however,  are  not 
to  be  invested  in  the  manner  in  which  savings  deposits  are  ordinarily 
invested,  but  must  be  employed  in  the  modes  described  by  the  National 
Bank  Act  and  Federal  Reserve  Act.  Such  deposits  are  not  held  upon 
a  trust,  but  the  relation  between  the  bank  and  the  depositor  is  that 
of  debtor  and  creditor.  (State  v.  People's  Nat.  Bank,  70  Atl.  Rep. 
(N.  H.),  542.)  In  some  of  the  States,  as  for  instance  in  New  York, 
the  use  of  the  word  "savings"  as  applied  to  bank  deposits  is  forbidden, 


12 

except  when  used  by  a  savings  bank  organized  under  the  State  law. 
(See  People  v.  Binghampton  Trust  Co.,  139  N.  Y.,  185.)  But  it  is 
questionable  whether  such  a  statute  would  be  held  by  the  courts  to 
have  any  application  to  National  banks  doing  business  within  the 
State.  (State  v.  People's  Nat.  Bank,  supra.)  See  Sec.  19  of  Federal 
Reserve  Act,  page   292    and  notes  thereunder. 

Safe  Deposit  Boxes. — In  the  absence  of  statutory  provisions,  the 
Comptroller  of  the  Currency  leaves  it  to  the  discretion  of  the  directors 
of  National  banks  as  to  whether  a  moderate  investment  of  the  bank's 
funds  shall  be  made  in  building  safe  deposit  vaults  for  the  use  of 
customers. 

Security  fob  Loans. — Since  the  words  "loans  on  personal  security" 
are  used  in  contradiction  to  real  estate  security,  National  banks  may 
take  in  addition  to  personal  security  for  discounts  and  loans,  pledges 
of  bonds,  choses  in  action,  bills  of  lading,  or  other  personal  chattels. 
(National  Bank  v.  Case,  96  U.  S.,  62S;  Cleveland,  Brown  &  Co.  v.  Shoe- 
man,  40  Oh.  St.,  176;  Spofford  v.  First  Nat.  Bank,  37  la.,  181;  Pittsburg 
L.  &  C.  "Works  v.  State  Nat.  Bank,  Fed.  Cas.  No.  11,  198;  Third  Nat. 
Bank  v.  Blake,  73  N.  Y.,  260.)  See  next  section  for  notes  on  real  estate 
loans. 

Dealing  in  Stocks  and  Bonds. — A  National  bank  has  no  power  to 
deal  in  stocks  and  bonds,  or  buy  and  sell  them  upon  commission.  Such 
operations  are  not  incidental  to  the  business  of  banking  as  defined  in 
the  statute.  (Weckler  v.  First  Nat.  Bank  of  Hagerstown,  42  Md.,  581; 
First  Nat.  Bank  of  Allentown  v.  Hock,  89  Pa.  St.,  324;  First  Nat. 
Bank  v.  National  Exchange  Bank,  92  U.  S.,  122;  California  Nat.  Bank 
v.  Kennedy,  167  U.  S.,  362;  Metropolitan  Trust  Co.,  v.  McKinnon,  172 
Fed.  Rep.,  846;  Barrow  v.  McKinnon,  196  Fed.  Rep.,  933;  Hotchkin  v. 
Third  Nat.  Bank,  219  Mass.,  234.) 

Dealing  in  Government  Bonds. — It  would  seem,  however,  that  Na- 
tional banks  as  financial  agents  of  the  Government  may  be  employed 
to  perform  any  duties  in  respect  to  its  bonds;  and  may  buy  and  sell 
and  exchange  Government  securities  for  their  customers.  It  has  been 
decided  that  National  banks  have  power  to  receive  United  States 
bonds  of  one  class  for  the  purpose  of  having  them  converted  into 
bonds  of  another  class,  and  that  the  exchanging  of  Government  se- 
curities is  a  legitimate  part  of  their  business.  (Yerkes  v.  National 
Bank  of  Port  Jervis,  69  N.  Y.,  383;  Van  Lenven  v.  First  Nat.  Bank, 
54  N.  Y.,  671;  Leach  v.  Hale,  31  Iowa,  69.) 


13 

Stocks  Taken  as  Security  For  or  in  Payment  of  Debts. — But  while 
the  National  banks  are  impliedly  prohibited  from  dealing  in  stocks, 
they  may  yet  accept  stock  when  it  is  transferred  to  them,  bona  fide,  in 
satisfaction  or  payment,  or  by  way  of  compromise  of  debts  due  to  or 
from  the  bank,  and  when  it  is  taken  with  a  view  to  its  subsequent  sale 
or  conversion  into  money  so  as  to  make  good  or  reduce  an  anticipated 
loss.  (First  Nat.  Bank  of  Charleston  v.  National  Exchange  Bank,  92 
U.  S.,  122;  Corn  Exchange  Nat.  Bank  v.  Kaiser,  160  Wis.,  199;  Fourth 
Nat.  Bank  v.  Stahlman,  132  Tenn.,  367;  First  Nat.  Bank  v.  Converse, 
200  U.  S.,  425.) 

Duty  to  Dispose  of  Stock  Properly  Acquired — Power  of  Cashter  to 
Sell. — Where  a  National  bank  legally  acquires  title  to  stock  in  an- 
other corporation,  previously  held  as  collateral  security  or  taken  for 
debt,  such  stock  should  be  disposed  of  promptly,  and  that  action  will 
be  required  by  the  Comptroller  of  the  Currency.  And  a  sale  of  the 
stock,  being  within  the  ordinary  business  of  the  bank,  may  be  made 
by  the  cashier.     (McBoyle  v.  Union  Nat.  Bank,  162  Cal.,  277.) 

Purchase  of  Stock  of  Other  National  Banks. — A  National  bank 
can  not  lawfully  acquire  and  hold  the  stock  of  another  National  bank 
as  an  investment.  And  where  such  stock  has  been  purchased  the  bank 
may  plead  its  want  of  power  as  a  defense  to  an  assessment  upon  the 
stock,  notwithstanding  It  appears  as  the  registered  owner  thereof,  and 
has  received  and  retained  the  dividends  thereon.  (First  Nat.  Bank  of 
Concord  v.  Hawkins,  174  U.  S.,  364.  But  see  Ohio  Valley  Nat.  Bank  v. 
Hulitt,  204  U.  S.,  162;  see  also  Shaw  v.  National  German-American 
Bank,  132  Fed.  Rep.,  658.) 

Purchase  of  Municipal  Bonds. — A  National  bank  has  power  to  deal 
in  municipal  bonds,  and  may  make  a  contract  with  a  municipal  cor- 
poration for  the  purchase  of  its  bonds.  (Newport  Nat.  Bank  v.  Board 
of  Education  of  Newport,  114  Ky.,  87;  Junction  City  v.  Bank,  96  Kan., 
407.) 

Not  Liable  as  Stockholder  Where  Purchase  of  Stock  is  Ultra 
Vires. — Where  a  National  bank  has  purchased  stock  in  another  cor- 
poration, out  of  the  ordinary  course  of  its  business,  and  not  as  security 
for  a  debt  previously  contracted,  it  may  plead  ultra  vires,  in  an  action 
against  it  as  a  stockholder  of  such  corporation.  (California  Nat.  Bank 
v.  Kennedy,  167  U.  S.,  362,  overruling  Kennedy  v.  California  Savings 
Bank,  101  Cal.,  495.) 

Bank  Can  Pass  Title  to  Stock  Illegally  Purchased. — Though  a 
purchase  of  corporate  stock  by  a  National  bank  is  ultra  vires  and  void- 


14 

able  as  between  the  parties,  it  is  not  void,  and  title  passes  to;  the  bank, 
which  it  may  transfer  to  a  third  person,  prior  to  any  election  by  the 
other  party  to  the  original  transaction  to  rescind  the  sale.  (Barron  v. 
McKinnon,  196  Fed.  Rep.,  933.) 

Purchasing  Commercial  Paper. — A  National  bank  may  purchase  and 
sell  commercial  paper,  the  term  "discount,"  properly  interpreted,  in- 
cluding a  "purchase"  as  well  as  a  loan.  (Morris  v.  Third  Nat.  Bank, 
142  Fed.,  25;  Smith  v.  Bank,  26  Oh.  St.,  141;  Yerkes  v.  Bank,  69  N.  Y., 
382;  Atlantic  State  Bank  v.  Savery,  82  N.  Y.,  291;  Pape  v.  Capital 
Bank,  20  Kans.,  440.  But  see  contra  Lazear  v.  National  Union  Bank, 
53  Md.,  78,  and  First  Nat.  Bank  v.  Pierson,  24  Minn.,  140;  see  qualify- 
ing rule  in  Prescott  Nat.  Bank  v.  Butler,  157  Mass.,  548;  Merchants 
Nat.  Bank  v.  Hanson,  33  Minn.,  40;  First  Nat.  Bank  v.  Smith,  8  S.  D., 
7,  and  analogous  cases,  National  Bank  v.  Mathews,  98  U.  S.,  621; 
National  Bank  v.  Whitney,  103  U.  S.,  99;  Reynolds  v.  Crawfordsville 
Bank,  112  U.  S.,  405;  Thompson  v.  St.  Nicholas  Bank,  146  TJ.  S.,  240, 
and  Ellerbee  v.  National  Exchange  Bank,  109  Mo.,  445.) 

Borrowing  of  Money. — 'The  power  to  borrow  money  or  to  give  notes 
is  not  expressly  conferred  by  the  act;  but  in  proper  cases  a  bank  may 
become  a  temporary  borrower  of  money.  (Western  Nat.  Bank  v.  Arm- 
strong, 152  U.  S.,  346;  Chemical  Nat.  Bank  v.  Armstrong,  65  Fed.  Rep., 
573.) 

But  such  transactions  are  so  much  outside  of  the  general  scope  of 
the  bank's  business,  that  the  officer  acting  for  the  bank  therein  must 
have  special  authority.  (Id.)  But  there  may  be  cases  where  an  officer 
may  legitimately  borrow  money  for  the  bank's  use  without  authority 
from  the  board.     (Cherry  v.  City  Nat.  Bank,  144  Fed.  Rep.,  587.) 

Rediscounts. — A  rediscount  by  a  National  bank  of  its  bills  receiv- 
able, though  it  endorses  the  same,  and  becomes  contingently  liable  for 
their  payment,  is  not  a  borrowing  of  mo'ney  by  the  bank,  but  has  some 
of  the  characteristics  of  a  sale.  (United  States  Nat.  Bank  v.  First  Nat. 
Bank  of  Little  Rock,  79  Fed.  Rep.,  296.)  And  such  a  transaction  is 
not  so  far  outside  the  scope  of  ordinary  banking  transactions  as  to  im- 
pose upon  the  bank  buying  such  paper  the  duty  of  ascertaining  that 
the  act  has  been  specially  authorized  by  the  board  of  directors.  (Id.) 
The  rule  that  an  officer  has  no  po'wer  to  borrow  money  unless  specially 
authorized  by  the  directors,  is  not  applicable  in  a  case  where  a  general 
and  long-established  usage  is  shown  between  correspondent  banks  to 
borrow  and  lend  through  the  officers  of  the  bank,  no  further  authority 
being  furnished  or  demanded;  the  presumption  being  that  such  usage 
was  condoned  and  acquiesced  in  by  the  directors  of  the  borrowing 
bank.     (Armstrong  v.  Chemical  Nat.  Bank,  83  Fed.  Rep.,  556.) 


15 

And  it  has  been  held  that  the  president  of  a  National  bank  who  has 
the  actual  management  of  its  operations  is  authorized  to  procure  the 
discount  of  its  paper.  (Hanover  Nat.  Bank  v.  First  Nat.  Bank  of 
Burlingame,  109  Fed.  Rep.,  421.)  The  subsequent  fraud  of  its  cashier 
will  not  relieve  a  National  bank  from  its  liability  as  indorser  on  paper 
transferred  by  him  within  the  scope  of  his  authority  to  an  innocent 
third  person.     (Auten  v.  Manistee  Nat.  Bank,  67  Ark.,  243.) 

Lending  Credit — Accommodation  Paper. — A  National  bank  has  no 
authority  to  lend  its  credit,  and  its  accommodation  paper  or  indorse- 
ment or  guaranty  will  be  void  in  the  hands  of  any  person  taking  the 
same  with  knowledge  of  the  facts.  (National  Bank  of  Brunswick  v. 
Sixth  Nat.  Bank,  212  Pa.  St.,  238;  Merchants'  Bank  of  Valdosta  v. 
Baird,  160  Fed.  Rep.,  642;  Fidelity  and  Deposit  Co.  v.  National  Bank 
of  Commerce  (Tex.),  106  S.  W.  Rep.,  782;  National  Bank  of  Commerce 
v.  Atkinson,  55  Fed.  Rep.,  465.) 

Guaranty. — A  National  bank  has  no  power  to  give  an  accommodation 
guaranty,  and  such  a  guaranty  is  not  enforceable  against  the  bank. 
(Bowen  v.  Needles  National  Bank,  94  Fed.  Rep.,  925.)  So,  it  has  been 
held  that  the  officers  and  directors  of  a  National  bank  have  no  author- 
ity to  bind  the  bank  by  a  guaranty  of  the  debts  of  a  third  person 
contracted  for  his  own  benefit.  (Commercial  Nat.  Bank  v.  Pirie,  82 
Fed.  Rep.,  799;  Farmers'  and  Merchants'  Nat.  Bank  v.  Smith,  77 
Fed.  Rep.,  129;  Rice  &  Hutchins  Atlanta  Co.  v.  Commercial  Nat.  Bank, 
88  S.  E.  Rep.,  999.)  So,  a  National  bank  has  no  power,  either  with  or 
without  consideration,  to  bind  itself  that  a  draft  drawn  upon  one  of 
its  customers  will  be  paid.  (First  National  Bank  of  Moscow  v. 
American  Nat.  Bank,  173  Mo.,  153;  National  Bank  of  Brunswick  v. 
Sixth  Nat.  Bank,  212  Pa.  St.,  238;  First  Nat.  Bank  of  Jallapooro  v, 
Monroe,  135  Ga.,  614.)  But  see  Citizens'  Nat.  Bank  v.  Appleton,  216 
U.  S.,  196. 

Guaranty  of  Paper  Sold  by  Bank. — While  a  National  bank  may  not 
lend  its  credit  for  accommodation,  it  may  guaranty  the  payment  of 
commercial  paper  as  incidental  to  the  exercise  of  its  power  to  buy 
and  sell  the  same.  (Thomas  v.  City  Nat.  Bank  of  Hastings,  40  Neb., 
501.) 

Assuming  Obligations  of  Another  Bank. — A  National  bank  has 
power  to  make  a  contract  whereby,  in  consideration  of  the  transfer  to 
it  of  the  office  furniture,  lease  and  cash  assets  of  another  National 
bank,  it  will  assume  and  pay  the  liabilities  of  such  other  bank.  (Scho- 
field  v.  State  Nat.  Bank,  97  Fed.  Rep.,  282.)  Where  a  contract  by 
Which   a  National  bank  assumed  all  the  obligations  of  an  insolvent 


16 

bank  in  contemplated  liquidation  was  fully  explained  at  a  meeting 
at  which  1,665  out  of  2,000  shares  were  represented,  and  after  the 
contract  was  executed,  it  was  ratified  by  a  vote  exceeding  two-thirds 
of  the  stock;  held  that  the  stockholders  were  not  thereafter  entitled 
to  claim  that  such  contract  was  ultra  vires.  (George  v.  Wallace,  135 
Fed.  Rep.,  286.) 

Loans  to  Officebs. — A  National  bank  may  make  loans  to  its  officers 
and  directors  as  freely  as  to  other  persons.  (Blair  v.  First  Nat.  Bank 
of  Mansfield,  10  Chicago  Legal  News,  84;  2  Nat.  Bank  Cas.,  173.) 
But  the  loans  must  be  honest,  and  the  borrowers  must  not  participate 
in  making  the  loans  to  themselves.   (Id.) 

Dealing  in  Checks. — Dealing  in  checks  is  a  part  of  the  usual  busi- 
ness of  banking,  and  would  be  within  the  general  powers  of  a  bank 
without  special  mention.  And  there  is  no  difference  in  this  respect 
between  checks  payable  to  bearer  and  those  payable  to  order.  (First 
National  Bank  of  Rochester  v.  Harris,  108  Mass.,  514.) 

Lending  fob  Customers. — A  National  bank  is  not  authorized  to  en- 
gage in  the  business  of  lending  money  for  its  customers;  and  it  can 
not  be  held  liable  for  the  acts  of  its  officers  in  so  doing.  (Grow  v. 
Cockrill,  63  Ark.,  418.) 

Employment  of  Attorneys. — Under  the  fourth  subdivision  of  section 
5136  a  National  bank  has  full  power  to  employ  attorneys  to  bring  or 
defend  suits  in  any  court  of  law  or  equity;  and  such  employment,  in- 
cluding the  agreement  for  compensation,  may  be  made  by  the  president 
of  such  bank.  (National  Bank  of  Guthrie  v.  Earl,  2  Old.,  617;  see  also 
Citizens'  National  Bank  of  Kingman  v.  Berry,  53  Kans.,  696.) 

Binding  Bank  to  Pay  Draft. — An  officer  of  a  National  bank  has  no 
power  to  bind  it  to  pay  the  draft  of  a  third  person  on  one  of  its  cus- 
tomers to  be  drawn  at  a  future  day,  when  it  expects  to  have  a  deposit 
from  him  sufficient  to  cover  it,  and  no  action  lies  against  the  bank  for 
its  refusal  to  pay  such  a  draft.  (Flannagan  v.  California  Nat.  Bank, 
56  Fed.  Rep.,  959.) 

False  Representation  of  Cashier. — A  National  bank  may  be  held 
liable  for  damages  for  a  false  representation  made  by  its  cashier  as  to 
credit  of  a  customer  seeking  credit  at  another  bank.  (Neveda  Bank 
of  San  Francisco  v.  Portland  National  Bank,  59  Fed.  Rep.,  338.) 

Collections. — The  cashier  of  a  National  bank  has  authority  on  be- 
half of  the  bank  to  make  a  collection  from  another  bank.     (Hanson  v. 


17 

Heard,  69  N.  H.,  190.)  And  a  National  bank  may  take  an  absolute 
assignment  of  a  claim  for  collection  and  agree  to  pay  the  proceeds,  or 
a  part  thereof,  to  another.     (King  v.  Miller,  53  Oregon,  53.) 

Partnership. — A  National  bank  has  no  power  to  become  a  member 
of  a  partnership,  and  cannot  be  held  liable  as  a  partner.  (Merchants' 
National  Bank  v.  Wehrmann,  09  Ohio  St.,  160.)  It  cannot,  even  in 
satisfaction  of  a  debt,  become  the  absolute  owner  of  shares  in  a  part- 
nership, and  as  it  cannot  take  the  shares,  it  cannot  be  held  liable  for 
the  debts  of  the  firm.  (Merchants'  Nat.  Bank  v.  Wehrmann,  202  U.  S., 
295.)    Nor  can  it  be  estopped  from  denying  that  it  was  a  partner.  {Id.) 

Contract  to  Pat  fob  the  Producing  of  Customer. — In  the  case  of 
Dresser  v.  Trader's  Nat.  Bank  (165  Mass.,  120),  the  Sup.  Ct.  of  Mass. 
held  that  a  National  bank  is  not  authorized  to  make  a  contract  to 
furnish  fire  insurance  to  a  person  in  consideration  of  his  procuring  a 
customer  for  the  bank,  and  intimated  that  a  National  bank  should  not 
pay  money  to  a  third  person  to  secure  a  customer. 

Donation  of  Funds. — The  president  of  a  National  bank  by  signing 
its  name  to  a  subscription  paper  can  not  obligate  the  bank  to  donate 
$200  to  parties  on  condition  that  they  would  erect  a  paper-mill.  Such 
donation  of  its  funds  to  aid  in  building  a  paper-mill  is  not  legitimate 
business  for  a  bank;  and  the  bank  is  not  bound  by  the  agreement. 
(Robertson  v.  Buffalo  Co.  Nat.  Bank,  40  Neb.,  235.)  Political  contribu- 
tions prohibited  by  act  Jan.  26,  1907.  See  §178.  Contributions  to 
Red  Cross  are  permitted  during  war.     See  §16. 

Clearing-house. — The  law  does  not  forbid  a  National  bank  becoming 
a  member  of  a  clearing-house  association  organized  merely  for  facili- 
tating settlements  between  the  members  thereof.  (Philler  et  al.  v. 
Patterson,  168  Pa.  St.,  468.) 

Officers — .Tenure  of  Office. — The  officers  hold  their  positions  by  the 
tenure  specified  in  the  statute,  to  wit,  the  pleasure  of  the  board  of 
directors  and  can  not  be  chosen  for  any  stated  term.  (Harrington  v. 
First  Nat.  Bank  of  Chittenango,  1  Thompson  &  Cook  (N.  Y.),  361; 
Westervelt  v.  Mohrenstecher,  76  Fed.  Rep.,  118.)  A  by-law  which 
provides  that  an  officer  shall  hold  office  for  a  stated  term,  as  for  one 
year,  is  void.  (Id.)  (See  also  Case  v.  First  Nat.  Bank,  109  N.  Y. 
Supp.,  1119.) 

Bonds  of  Officers. — The  directors  should  require  bonds   from  the 
officers  of  the   bank  and   are   personally  liable   for   losses   caused   by 
neglect  in  leaving  the  management  wholly  to  the  cashier  who  had  but 
2 


18 

little   property   and  of   whom   they  required   no   bond.      (Robinson   v. 
Hall,  63  Fed.  Rep.,  222,  reversing  59  Fed.  Rep.,  648.) 

A  surety  on  the  bond  of  a  cashier  of  a  National  bank  is  not  dis- 
charged by  the  fact  that  before  the  bond  was  given,  the  cashier  had 
committed  frauds  upon  the  bank,  if  such  frauds  were  unknown  to  the 
officers  of  the  bank,  although  they  were  guilty  of  gross  negligence  in 
not  discovering  them.     (Tapley  v.  Martin,  116  Mass.,  275.) 

Insurance  of  Lives  or  Officers. — The  Comptroller  of  the  Currency 
has  refused  to  approve  a  plan  for  the  insurance  by  a  National  bank 
of  the  lives  of  its  officers  or  employes  for  the  benefit  of  the  bank,  but 
recommends  the  furnishing  to  small  salaried  clerks  and  employes  in- 
surance equal  to  one  year's  salary  for  the  benefit  of  their  families,  the 
premiums  to  be  met  by  an  adjustment  of  salaries. 

Ultra  Vires. — Where  a  National  bank  makes  a  contract  which  is 
beyond  its  powers,  such  contract  is  void,  and  not  merely  voidable,  and 
it  can  not  be  estopped  from  making  the  defense  of  ultra  vires  when 
it  is  sued  for  non-performance  on  its  part.  (Metropolitan  Stock  Ex- 
change v.  Lyndonville  Nat.  Bank  (Vt.),  57  Atl.  Rep.,  101.)  But  there 
are  many  cases  where  such  a  contract,  having  been  performed,  has  been 
enforced.  (Logan  County  Bank  v.  Townsend,  139  U.  S.,  67;  Prescott 
Nat.  Bank  v.  Butler,  157  Mass.,  548.)  So,  where  a  National  bank  has 
made  a  loan  upon  a  real  estate  mortgage,  its  want  of  power  to  take 
such  a  security  is  not  a  defense  to  the  mortgagee  in  a  suit  by  the  bank 
to  foreclose  the  mortgage.  (National  Bank  v.  Matthews,  98  U.  S.,  621.) 
See  also  Hennessey  v.  City  of  St.  Paul,  54  Minn.,  219.  And  so,  in  an 
action  by  a  National  bank  on  railroad  aid  bonds,  the  obligor  cannot 
set  up  as  a  defense  that  the  purchase  of  the  bonds  by  the  bank  was 
ultra  vires.  (Town  Council  of  Lexington  v.  Union  Nat.  Bank,  75  Miss., 
1.)  And  where  a  borrower  has  deposited  collateral  securities  with  a 
National  bank,  he  cannot  set  up  as  a  defense  that  the  bank  had  no 
power  to  take  the  same.    (Reynolds  v.  Touzalin  Imp.  Co.,  62  Neb.  236.) 

Where  Bank  Has  Received  Benefits  of  Ultra  Vires  Contract. — 
Conversely,  where  a  National  bank  has  received  and  retained  the  bene- 
fit of  a  contract  made  by  its  officers,  it  can  not  plead  that  the  contract 
was  unauthorized  by  the  directors,  or  beyond  the  power  of  the  bank 
or  its  officers  to  make.  (Tootle  v.  First  Nat.  Bank  of  Port  Angeles,  6 
Wash.,  181;  Trustees  of  First  Presbyterian  Church  v.  National  State 
Bank,  57  N.  J.  Law,  27;  First  Nat.  Bank  of  Grand  Forks  v.  Anderson, 
172  U.  S.,  573;  s.  c.  5  N.  D.,  451;  Aldrich  v.  Chemical  Nat.  Bank,  176 
U.  S.,  618;  Seeber  v.  Commercial  Nat.  Bank  of  Ogden,  77  Fed.  Rep., 
957.) 


19 

Money  Equitably  Belonging  to  Others. — But  a  National  bank  can 
not  receive  moneys  equitably  belonging  to  another  and  not  account  for 
the  same,  even  though  they  be  received  as  an  incident  of  the  bank's 
illegal  contract.  (National  Bank  of  Commerce  v.  Equitable  Trust 
Company,  227  Fed.  Rep.,  526;  s.  c.  211  Fed.  Rep.,  688.  See  Citizens' 
Nat.  Bank  v.  Appleton,  216  U.  S.,  196,  and  compare  First  Nat.  Bank  v. 
Monroe,  135  Ga.,  614.)  So,  though  the  purchase  and  carrying  on  of 
a  mercantile  company  by  a  National  bank  was  illegal,  the  persons 
dealing  with  the  mercantile  company  are  entitled  to  receive  the  money 
paid  into  the  bank  for  their  account.  (Rankin  v.  Emigh,  218  U.  S., 
27;  Emigh  v.  Earling,  134  Wis.,  565.) 

National  Bank  as  Agent  in  Making  Collections. — A  National  bank 
under  the  power  to  "exercise  all  such  incidental  powers  as  shall  be 
necessary  to  carry  on  banking,"  may  do  those  acts  and  occupy  those 
relations  which  are  usual  or  necessary  in  making  collections  of  com- 
mercial paper  and  other  evidences  of  debt.  It  is  both  usual  and  proper 
for  the  legal  title  to  negotiable  instruments  to  be  vested  in  a  bank 
by  mere  endorsement  for  purposes  of  collection,  holding  the  proceeds 
as  the  endorser  directs;  and  there  is  no  difference  in  law  if  the  title 
is  conveyed  by  a  lengthier  and  more  formal  instrument.  In  both  cases 
the  bank  takes  the  legal  title  for  the  purposes  of  demand  and  collec- 
tion; and  in  a  proper  case,  there  is  no  reason  why  it  may  not  go 
further  and  institute  suit  thereon  in  its  own  name  for  the  recovery  of 
what  may  be  due.     (Miller  v.  King,  223  U.  S.,  505.) 

Bank  Guaranty  Law. — The  National  banks  located  in  Kansas  may 
not  lawfully  avail  themselves  of  the  provisions  of  the  Bank  Depositors' 
Guaranty  Act  of  that  State.  (Dolley  v.  Abilene  Nat.  Bank,  179  Fed. 
Rep.,  461.)  But  though  the  effect  of  the  Act  should  be  to  attract  de- 
positors from  the  National  banks  to  the  guaranteed  State  banks,  this 
would  not  make  the  statute  void.  But  see  First  Nat.  Bank  of  Holstein 
v.  Shallenberger,  172  Fed.  Rep.,  999.  The  constitutionality  of  State 
Guaranty  laws  is  upheld  in  Assaria  State  Bank  v.  Dolley,  219  U.  S., 
121;  Noble  State  Bank  v.  Haskell,  219  U.  S.,  104. 

§  16.  Subscriptions  to  American  National  Red  Cross. —  That 
during  the  continuance  of  the  state  of  war  now  existing  it  shall 
be  lawful  for  any  national  banking  association  to  contribute  to 
the  American  National  Bed  Cross,  out  of  any  net  profits  otherwise 
available  under  the  law  for  the  declaration  of  dividends,  such 
sum  or  sums  as  the  directors  of  said  association  shall  deem  expedi- 
ent.   Each  association  shall  report  to  the  Comptroller  of  the  Cur- 


20 

rency  within  ten  days  after  the  making  of  any  such  contribution 
the  amount  of  such  contribution  and  the  amount  of  net  earnings 
in  excess  of  such  contribution.  Such  report  shall  be  attested  by 
the  president  or  cashier  of  the  association  in  like  manner  as  the 
report  of  the  declaration  of  any  dividend. 

Sec.  2.  That  all  sums  so  contributed  shall  be  utilized  by  the 
American  National  Red  Cross  in  furnishing  volunteer  aid  to  the 
sick  and  wounded  of  the  combatant  armies,  the  voluntary  relief  of 
the  Army  and  Navy  of  the  United  States,  and  the  relief  and  mitiga- 
tion of  the  suffering  caused  by  the  war  to  the  people  of  the  United 
States  and  their  allied  nations.     (Act  May  22,  1918.) 

§  17.  limitations  as  to  Heal  Estate  and  Mortgages,  except  as 
provided  In  the  Federal  Eeserve  Act. — A  National  banking  asso- 
ciation may  purchase,  hold,  and  convey  real  estate  for  the  following 
purposes,  and  for  no  others: 

First.  Such  as  shall  be  necessary  for  its  immediate  accommo- 
dation in  the  transaction  of  its  business. 

Second.  Such  as  shall  be  mortgaged  to  it  in  good  faith  by  way 
of  security  for  debts  previously  contracted. 

Third.  Such  as  shall  be  conveyed  to  it  in  satisfaction  of  debts 
previously  contracted  in  the  course  of  its  dealings. 

Fourth.  Such  as  it  shall  purchase  at  sales  under  judgments,  de- 
crees, or  mortgages  held  by  the  association,  or  shall  purchase  to 
secure  debts  due  to  it. 

But  no  such  association  shall  hold  the  possession  of  any  real 
estate  under  mortgage,  or  the  title  and  possession  of  any  real 
estate  purchased  to  secure  any  debts  due  to  it,  for  a  longer  period 
than  five  years.     (Rev.  Stat.  U.  S.  Sec.  5137.) 

For  power  of  National  banks  to  make  loans  on  real  estate  as  pro- 
vided by  the  Federal  Reserve  Act,  see  next  section. 

How  Purchases  and  Conveyances  Made. — In  purchasing  or  convey- 
ing real  estate  a  National  bank  should  act  through  its  president  or 
cashier,  duly  authorized  by  regular  resolution  of  its  board  of  directors. 

Banking-House — Character  of  Improvement. — Land  purchased  or 
leased  by  a  National  bank  for  the  purposes  of  its  business  may  be 


21 

improved  by  it  so  as  to  yield  the  largest  income  and  lessen  its  own 
rent.  Where  a  National  bank  invests  in  real  estate  in  excess  of  its 
powers,  and  the  transaction  has  been  acquiesced  in  for  a  long  time, 
the  Government  only  can  be  heard  to  complain,  and  a  receiver  can  not 
do  so.  (Brown  i?.  Schleier,  118  Fed.  Rep.,  981.)  A  bank  may  erect  a 
building  partly  for  its  own  use  and  partly  to  let  out  to  tenants. 
(Wigert  v.  Bank,  175  Fed.,  739.)  Investment  in  a  banking  house 
should  not  be  out  of  proportion  to  the  capital  and  business  of  the 
bank  and  such  a  question  is  primarily  for  decision  by  the  board  ot 
directors. 

Leasehold — Agreement  to  Rrect  Building  on. — A  National  bank 
may  lease  property  for  a  term  of  years  and  agree  with  the  lessor  to 
construct  such  a  building  as  it  desires,  provided  that  It  acts  In  good 
faith,  solely  with  a  view  of  Obtaining  an  eligible  location,  and  not 
with  a  view  of  investing  its  funds  in  real  property  or  embarking  them 
in  speculations  in  real  estate.  (Brown  v.  Schleier,  et  al.,  118  Fed. 
Rep.,  981.)  Such  a  lease  is  not  invalid  because  made  for  a  longer 
period  than  the  corporate  existence  of  the  bank.  (Id.)  And,  even 
though  the  lease  be  assignable  only  with  the  consent  of  the  lessor. 
(International  Trust  Company  v.  Weeks,  203  U.  S.,  364.)  Nor  is  such 
a  lease  invalid  because  the  gross  rents  payable  during  the  term  will 
reach  a  sum  exceeding  the  amount  of  the  bank's  capital  stock.  (Brown 
v.  Schleier,  et  al.,  118  Fed.  Rep.,  981.)  But  a  National  bank  which  has 
not  been  authorized  by  the  certificate  of  the  Comptroller  e'f  the  Cur- 
rency to  commence  the  business  of  banking  has  no  power  to  execute 
a  lease  of  a  banking-house  for  a  term  of  years.  (McCormick  v.  Market 
Nat.  Bank  of  Chicago,  165  U.  S.,  538  s.  c,  162  111.,  100.)  Nevertheless, 
persons  organizing  a  National  bank  may  secure  an  option  on  property 
desired  for  a  banking-house  with  a  provisional  agreement  for  a  lease 
to  be  executed  when  the  bank  is  chartered. 

Taking  Stock  in  Building  Company. — Where  it  acts  in  good  faith, 
with  a  view  to  providing  suitable  quarters  for  the  transaction  of  its 
business,  a  National  bank  may  acquire  and  hold  stock  In  a  building 
corporation.     (Fourth  Nat.  Bank  v.  Stahlman,  132  Tenn.,  367.) 

Cashier  Has  No  Authority  to  Make  Leases.— -The  leasing  of  any 
part  of  the  bank's  building  to  others  is  outside  of  the  ordinary  duties 
of  the  cashier,  and  for  this  purpose  he  should  have  authority  from  the 
board.     (Spongberg  v.  First  Nat.  Bank,  18  Idaho,  524.) 

When  Real  Estate  Security  May  Be  Taken. — The  authority  con- 
ferred by  subdivisions  2,  3  and  4  is  for  the  purpose  of  enabling  the 
bank  to  collect  the  debts  due  it,  and  is  not  a  general  grant  of  power 


22 

to  deal  in  real  estate,  or  to  take  real  estate  or  any  mortgage  or  lien 
thereon  as  security  for  contemporaneous  loans.  Prior  to  taking  a 
mortgage  or  conveyance  of  real  estate  the  debt  must  previously  have 
been  contracted  in  good  faith  and  the  security  or  real  estate  later 
taken  in  good  faith  to  avoid  or  lessen  a  contemplated  loss.  (Bank  v. 
Conway,  87  Wash.,  506;  Bank  v.  Matthews,  98  U.  S.,  621;  Fowler  v. 
Scully,  72  Pa,  St.,  451;  Crocker  v.  Whitney,  71  N.  Y.,  161;  Fridley  v. 
Bowen,  87  111.,  151;  First  Nat.  Bank  v.  Maxfleld,  83  Me.,  576;  Upton  v. 
Bank,  120  Mass.,  153.)  In  order  to  secure  antecedent  indebtedness, 
the  bank  may  make  an  additional  advance  and  take  a  mortgage  on 
real  estate  to  secure  both  the  advance  and  the  prior  debt,  and  the 
real  estate  may  be  worth  more  than  the  debt.  And  it  may  discharge 
or  purchase  prior  liens  and  do  the  things  an  individual  would  reason- 
ably do  under  similar  circumstances  to  secure  himself  against  loss. 
(Libby  v.  Bank,  99  111.,  622;  Ornn  v.  Bank,  16  Kans.,  34;  Holmes  v. 
Boyd,  90  Ind.,  322;  Morris  v.  Bank,  142  Fed.,  25;  Magoffin  v.  Bank,  69 
S.  W.  (Ky.),  702;  Howard  N.  B.  v.  Loomis;  51  Vt.  349;  New  Orleans 
Nat.  Bank  v.  Raymond,  29  La.  Ann.  355.) 

Debentures — Stock  of  Real  Estate  Companies — Wife's  Separate 
Estate. — One  question  of  frequent  occurrence  is  whether  the  deben- 
tures of  mortgage  loan  companies  can  be  taken  as  collateral.  This 
point  has  never  been  judicially  determined,  but  the  Comptrollers  of 
the  Currency  have  generally  expressed  the  opinion  that  they  are  not 
proper  securities  for  a  National  bank  to  receive.  But  it  has  been  held 
by  the  Supreme  Court  of  Minnesota  that  a  National  bank  may  make 
loans  upon  the  security  of  the  stock  of  a  corporation  whose  property 
consists  solely  of  real  estate.  (Baldwin  v.  State  Nat.  Bank,  26  Minn., 
43.)  Where  a  married  woman  indorsed  a  note:  "I  hereby  charge  my 
separate  and  personal  estate  for  the  payment  of  the  within  note"  it 
was  held  in  Third  Nat.  Bank  v.  Blake,  73  N.  Y.,  260  that  the  indorse- 
ment was  to  be  treated  as  personal  security,  within  the  meaning  of 
the  National  banking  law,  and  not  as  a  mortgage. 

Mortgage  Given  to  Indorser  to  Enure  to  Bank. — A  National  bank 
may  make  an  agreement  that,  in  case  a  note  discounted  by  it  shall 
not  be  paid,  a  mortgage  given  by  the  maker  to  his  indorser  shall 
enure  to  the  benefit  of  the  bank.  (First  Nat.  Bank  v.  Haire,  36  Iowa, 
443). 

Promissory  Notes  Secured  by  Mortgage  Notes — Judgment  Notes. — 
The  Solicitor  of  the  Treasury,  in  an  opinion  given  to  the  Comptroller 
of  the  Currency,  has  held  that  it  is  not  unlawful  for  a  National  bank 
to  lend  upo'n  a  promissory  note,  which  is  secured  by  bonds  and  notes 


23 

which  are  in  turn  secured  by  real  estate.  Nor  is  it  unlawful  for  a 
National  bank  to  lend  on  judgment  notes,,  which  when  recorded  be- 
come liens  on  real  estate;  provided  such  loans  are  made  solely  on 
personal  security  given. 

Violation  of  Law  Can  Not  Be  Set  up  by  Borrower. — No  one  but  the 
Government  can  be  heard  to  complain  that  a  bank  has  exceeded  its 
powers  and  acquired  real  estate  or  made  real  estate  loans.  The  only 
penalty  which  it  incurs  is  a  liability  to  a  forfeiture  of  its  franchises. 
The  conveyance  or  mortgage  is  not  void,  but  o"nly  voidable.  (National 
Bank  v.  Matthews,  98  U.  S.,  C21;  Kerfoot  v.  Farmers'  &  Merchants' 
Bank,  218  U.  S.,  281;  Barron  v.  McKinnon,  196  Fed.  Rep.,  933;  Baker 
v.  Schofield,  221  Fed.  Rep.,  322;  Reynolds  v.  Crawfordsville  Bank,  112 
U.  S.,  405.) 

Policy  of  the  Law. — The  prohibition  against  loans  on  real  estate 
other  than  as  permitted  by  the  Federal  Reserve  Act,  though  often 
criticized,  is,  by  the  great  majority  of  bankers,  deemed  wise  and 
salutary.  The  very  nature  of  the  banking  business,  as  distinguished 
from  insurance,  trust  and  other  similar  business,  demands  liquid  and 
readily  convertible  assets. 

The  prohibition  against  loans  c'n  real  estate  has  now  been  modified 
by  Sec.  24  of  the  Federal  Reserve  Act,  so  as  to  permit  National  banks 
to  make  loans  on  the  most  liquid  and  best  secured  forms  of  real 
estate  securities.     (See  following  section.) 

§  18.  Loans  on  Eeal  Estate  by  National  Banks. — Any  Na- 
tional Banking  association  not  situated  in  a  central  reserve  city 
may  make  loans  secured  by  improved  and  unencumbered  farm  land 
situated  within  its  Federal  reserve  district  or  within  a  radius  of 
one  hundred  miles  of  the  place  in  which  such  bank  is  located,  ir- 
respective of  district  lines,  and  may  also  make  loans  secured  by 
improved  and  unencumbered  real  estate  located  within  one  hundred 
miles  of  the  place  in  which  such  bank  is  located,  irrespective  of 
district  lines;  but  no  loan  made  upon  the  security  of  such  farm 
land  shall  be  made  for  a  longer  time  than  five  years,  and  no  loan 
made  upon  the  security  of  such  real  estate  as  distinguished  from 
farm  land  shall  be  made  for  a  longer  time  than  one  year  nor  shall 
the  amount  of  any  such  loan,  whether  upon  such  farm  land  or 
upon  such  real  estate,  exceed  fifty  per  centum  of  the  actual  value 
of  the  property  offered  as  security.     Any  such  bank  may  make 


24 

such  loans,  whether  secured  by  such  farm  land  or  such  real  estate, 
in  an  aggregate  sum  equal  to  twenty-five  per  centum  of  its  capital 
and  surplus  or  to  one-third  of  its  time  deposits  and  such  banks 
may  continue  hereafter  as  heretofore  to  receive  time  deposits  and 
to  pay  interest  on  the  same. 

The  Federal  Reserve  Board  shall  have  power  from  time  to  time 
to  add  to  the  list  of  cities  in  which  National  banks  shall  not  be 
permitted  to  make  loans  secured  upon  real  estate  in  the  manner 
described  in  this  section.  (Sec.  24,  Act  Dec.  23,  1913,  38  Stat.  L. 
273,  as  amended  by  Act  Sept.  7,  1916,  39  Stat.  L.  754.) 

Regulation  G  of  Federal  Reserve  Board,  Series  of  1917  (Super- 
ceding Reg.  G  of  1915).  [To  avoid  repetition  Sec.  2-1  as  amended  is 
not  quoted.] 

National  banks  not  located  in  central  reserve  cities  may,  therefore, 
legally  make  loans  secured  by  improved  and  unencumbered  farm  land 
or  other  real  estate  as  provided  by  this  section. 

Certain  conditions  and  restrictions  must,  however,  be  observed — 

(a)  There  must  be  no  prior  lien  on  the  land;  that  is,  the  lending 
bank  must  hold  an  absolute  first  mortgage  or  deed  of  trust. 

(b)  The  amount  of  the  loan  must  not  exceed  50  per  cent,  of  the 
actual  value  of  the  land  by  which  it  is  secured. 

(c)  The  maximum  amount  of  loans  which  a  national  bank  may  make 
on  real  estate,  whether  on  farm  land  or  on  other  real  estate  as  dis- 
tinguished from  farm  land,  is  limited  under  the  terms  of  the  act  to  an 
amount  not  in  excess  of  one-third  of  its  time  deposits  at  the  time  of 
the  making  of  the  loan,  and  not  in  excess  of  one-third  of  its  average 
time  deposits  during  the  preceding  calendar  year:  Provided,  however, 
That  if  one-third  of  such  time  deposits  as  of  the  date  of  making  the 
loan  or  one-third  of  the  average  t'me  deposits  for  the  preceding  calen- 
dar year,  is  less  than  one-fourth  of  the  capital  and  surplus  of  the  bank 
as  of  the  date  of  making  the  loan,  the  bank  in  such  event  shall  have 
authority  to  make  loans  upon  real  estate  under  the  terms  of  the  Act 
to  the  extent  of  one-fourth  of  the  bank's  capital  and  surplus  as  of 
that  date. 

(d)  Farm  land  to  be  eligible  as  security  for  a  loan  by  a  National 
bank  must  be  situated  within  the  Federal  reserve  district  in  which 
such  bank  is  located  or  within  a  radius  of  100  miles  of  such  bank 
irrespective  of  district  lines. 


25 

(e)  Real  estate  as  distinguished  from  farm  land  to  be  eligible  as 
security  for  a  loan  by  a  National  bank  must  be  located  within  a  radius 
of  100  miles  of  such  bank  irrespective  of  district  lines. 

(/)  The  right  of  a  National  bank  to  "make  loans"  under  section  24 
includes  the  right  to  purchase  or  discount  loans  already  made  as  well 
as  the  right  to  make  such  loans  in  the  first  instance:  Provided,  how- 
ever, That  no  loan  secured  by  farm  land  shall  have  a  maturity  of 
more  than  five  years  from  the  date  on  which  it  was  purchased  or 
made  by  the  National  bank  and  that  no  loan  secured  by  other  real 
estate  shall  have  a  maturity  of  more  than  one  year  from  such  dat8. 

(g)  Though  no  National  bank  Is  authorized  under  the  provisions  of 
section  24  to  make  a  loan  on  the  security  of  real  estate,  other  than 
farm  land,  for  a  period  exceeding  one  year,  nevertheless,  at  the  end  of 
the  year,  it  may  properly  make  a  new  loan  upon  the  same  security 
for  a  period  not  exceeding  one  year.  The  maturing  note  must  be 
cancelled  and  a  new  note  taken  in  its  place,  but  in  order  to  obviate 
the  necessity  of  making  a  new  mortgage  or  deed  of  trust  for  each 
renewal,  the  original  mortgage  or  deed  of  trust  may  be  so  drawn  in 
the  first  instance  as  to  cover  possible  future  renewals  of  the  original 
note.  Under  no  circumstances,  however,  must  the  bank  obligate  itself 
in  advance  to  make  such  a  renewal.  It  must,  in  all  cases,  preserve  the 
right  to  require  payment  at  the  end  of  the  year  and  to  foreclose  the 
mortgage  should  that  action  become  necessary.  The  same  principles 
apply  to  loans  of  longer  maturities  secured  by  farm  lands. 

(h)  In  order  that  real  estate  loans  held  by  a  bank  may  be  readily 
classified,  a  statement  signed  by  the  officers  making  a  loan  and  having 
knowledge  of  the  facts  upon  which  it  is  based  must  be  attached  to 
each  note  secured  by  a  first  mortgage  on  the  land  by  which  the  loan 
is  secured,  certifying  in  detail  as  of  the  date  of  the  loan  that  all  of 
the  requirements  of  law  have  been  duly  observed. 

Loans  on  Real  Estate. — Loans  on  real  estate  come  within  the  limi- 
tation imposed  by  section  5200  of  the  Revised  Statutes  of  the  United 
States.  No  National  bank,  therefore,  may  loan  to  any  one  person, 
firm,  or  corporation  on  the  security  of  real  estate  an  amount  exceeding 
10  per  cent,  of  the  capital  and  surplus  of  such  bank.  (Opinion  of 
Counsel  of  Board,  March  23,  1916.) 

Real  Estate  Loans  by  Central  Reserve  City  National  Banks. — 
Any  National  bank  located  in  the  outskirts  of  a  central  reserve  city, 
but  within  the  corporate  limits  of  such  city,  Is  not  authorized  under 
the  provisions  of  the  Federal  Reserve  Act  to  make  loans  on  real  estate. 
(Opinion  of  Counsel  of  Board,  Sept.  27,  1916.) 


26 

Loans  on  City  Real  Estate. — National  banks  in  making  loans  se- 
cured by  improved  and  unencumbered  real  estate  may  lend  an  amount 
equal  to  one-half  of  the  market  value  of  the  real  estate  as  improved. 
The  value  of  the  improvements  constitutes  a  part  of  the  value  of  the 
properly  offered  as  security.  (Opinion  of  Counsel  of  Board,  Oct.  17, 
1916.) 

Banks  Not  Compelled  to  Make  Loans. — Member  banks  may  loan 
funds  on  real  estate  for  a  limited  period,  protecting  themsleves  by 
mortgage,  but  there  is  nothing  in  the  Federal  Reserve  Act  which  com- 
pels them  to  make  such  loans.  Notes  based  on  real  estate  security 
may  not  be  rediscounted  with  Federal  Reserve  Banks.  (Informal 
Ruling  of  Board,  July  8,  1916.) 

Loans  to  be  Included  in  Reporting. — Neither  Federal  Reserve  Board 
nor  Comptroller  of  the  Currency  can  require  banks  that  may  choose 
to  make  loans  under  section  24  of  the  Act  to  include  in  the  limitation 
under  that  section  the  aggregate  of  real  estate  loans  which  may  have 
been  acquired  under  section  5137  of  the  Revised  Statutes.  (Informal 
Ruling  of  Board,  Oct.  3,  1916.) 

Circular  of  Comptroller,  Oct.  27,  1916. — 

National  banks  not  situated  in  a  *central  reserve  city  are  now  au- 
thorized to  make  loans  secured  by  real  estate  upon  the  following 
conditions: 


IF  THE  REAL  ESTATE  SECURITY  IS  FARM  LAND 

1.  It  must  be   improved. 

2.  There  must  be  no  prior  lien. 

3.  Property  must  be  located  in  the  same  Federal  reserve  district  as 

the  bank  making  the  loan  or  within  a  radius  of  100  miles  of  the 
place  in  which  the  bank  is  located  irrespective  of  district  lines. 

4.  The  amount  of  the  loan  must  not  exceed  50  per  cent,  of  the  actual 

value  of  the  property  upon  which  it  is  secured. 

5.  The  loan  must  not  be  for  a  period  longer  than  five  years. 


*The  Federal  Reserve  Board  is  authorized  under  the  Act,  at  its  dis- 
cretion, to  increase  the  number  of  cities  in  which  it  is  not  permissible 
for  National  banks  to  make  loans  secured  by  real  estate.  At  present 
the  only  prohibited  cities  are  the  three  central  reserve  cities  of  New 
York,  Chicago  and  St.  Louis. 


27 

IF  THE  REAL  ESTATE  IS  NOT  FARM  LAND— 

1.  It  must  be  improved. 

2.  There  must  be  no  prior  lien. 

3.  Property  must  be  located   within  a  radius  cf  100  miles  of  the 
place  in  which  the  bank  is  located  irrespective  of  district  lines. 

4.  The  amount  of  the  loan  must  not  exceed  50  per  cent,  of  the  actual 

value  of  the   property   upon  which   it  is   secured. 

5.  The  loan  must  not  be  for  a  period  longer  than  one  year. 

The  aggregate  of  loans  secured  by  real  estate — farm  land  and  other 
improved  real  estate — made  by  any  bank  must  not  exceed — 

One-fourth  of  the  capital  and  surplus  of  the  bank,  or  one-third  of  its 
time  deposits,  at  the  time  of  making  the  loan,  not  exceeding 
one-third  of  its  average  time  deposits  during  the  preceding 
calendar  year; 

Provided,  however,  that  if  "one-third  of  such  time  deposits"  as  of 
the  date  of  making  the  loan,  or  "one-third  of  the  average  time 
deposits  for  the  preceding  calendar  year"  shall  have  amounted 
to  less  than  "one-fourth  of  the  capital  and  surplus  of  the  bank" 
as  of  the  date  of  the  loan,  the  bank  shall  have  authority  to 
make  loans  upon  real  estate  under  the  terms  of  the  Act  to  the 
extent  of  "one-fourth  of  the  bank's  capital  and  surplus"  as  of 
the  date  of  making  the  loan. 

A  certificate  should  be  attached  to  each  real  estate  loan  made  under 
the  provisions  of  Section  24,  in  the  following  form: 

WE  CERTIFY  THAT:  ,  192 

Loan  number  (ours. 

Amount,   $ 

Maker 

Dated    

Was  discounted  or  purchased  by  this  bank  on (if  loa,n 

originally  made  by  bank  on  date  of  note  this  fact  should  be  stated). 

Its  maturity  is    

The  time  to  maturity  from  date  note  was  acquired  by  this  bank 

It  is  secured  by  a  lien  on  real  estate  as  follows  (include  here  brief 

description  of  property  under  following  headings) : 
Farm  land   (give  number  of  acres)   or  other  real  estate  as  follows: 


Improved   (state  character  of  improvements) : 


28 

There  is  no  prior  lien  (see  abstract  of  title  on  file  in  bank). 

Land  is  located  within  Federal  Reserve  District  No. (or  is 

located  within  100  miles  of  location  of  this  bank,  as  the  case  may  be). 

The  estimated  fair  value  of  the  land  is  $ per  acre,  being  $ 

The  estimated  value  of  the  improvements  on  the  land  is ? 

The  total  value  of  the  property  is $ 

The  amount  of  the  loan  does  not  exceed  50  per  cent   of  the  actual 

value  of  the  property  by  which  it  is  secured. 


Officers  of  Bank ot 

[Upon  request  the  publishers  will  furnish  separate  forms  for  such 
certificates  by  officers.] 

§  19.  Power  of  National  Banks  As  Insurance  Agents.— That 
in  addition  to  the  powers  now  vested  by  law  in  National  bank- 
ing associations  organized  under  the  laws  of  the  United  States 
any  such  association  located  and  doing  business  in  any  place  the 
population  of  which  does  not  exceed  five  thousand  inhabitants,  as 
shown  by  the  last  preceding  decennial  census,  may,  under  such 
rules  and  regulations  as  may  be  prescribed  by  the  Comptroller  of 
the  Currency,  act  as  the  agent  for  any  fire,  life,  or  other  insurance 
company  authorized  by  the  authorities  of  the  State  in  which  said 
bank  is  located  to  do  business  in  6aid  State,  by  soliciting  and 
selling  insurance  and  collecting  premiums  on  policies  issued  by 
such  company;  and  may  receive  for  services  so  rendered  such  fees 
or  commissions  as  may  be  agreed  upon  between  the  said  association 
and  the  insurance  company  for  which  it  may  act  as  agent;  and 
may  also  act  as  the  broker  or  agent  for  others  in  making  or  pro- 
curing loans  on  real  estate  located  within  one  hundred  miles  of 
the  place  in  which  said  bank  may  be  located,  receiving  for  such 
services  a  reasonable  fee  or  commission:  Provided,  however,  That 
no  such  bank  shall  in  any  case  guarantee  either  the  principal  or 
interest  of  any  such  loans  or  assume  or  guarantee  the  payment  of 
any  premium  or  insurance  policies  issued  through  its  agency  by 
its  principal:  And  provided  further,  That  the  bank  shall  not 
guarantee  the  truth  of  any  statement  made  by  an  assured  in  filing 
his  application  for  insurance.  (Sec.  13,  Act  Dec.  23,  1913,  as 
amended  by  Act  Sept.  7,  1916,  39  Stat.  L.,  752.) 


29 

Right  of  a  National  Bank  to  Write  Insubance  Through  Its  Of- 
ficers.— Except  as  specified  above,  National  banks  have  no  express  or 
implied  power  to  write  fire,  cyclone,  liability,  or  other  kinds  of  in- 
surance, or  to  receive  the  profits  from  insurance  contracts  entered  into 
by  its  officers.     (Opinion  of  Counsel  of  Board,  Jan.  13,  1915.) 

Regulation  of  Compteolleb  of  Cubbency,  Dec.  1,  1910. — It  will  be 
seen  from  the  above  that  in  order  to  avail  itself  of  the  provisions  of 
this  act  relative  to  acting  as  agent  for  an  insurance  company: 

(a)  The  bank  must  be  located  in  a  place  the  population  of  which 
does  not  exceed  5000  as  shown  by  the  last  preceding  decennial 
census. 
(&)  The  Insurance  company  for  which  the  bank  acts  as  agent  must 
have  been  authorized  by  the  authorities  of  the  State  in  which 
the  bank  is  located  to  do  business  in  that  State. 

(c)  The  activities  of  the  bank  as  such  agent  must  be  restricted  to 
the  soliciting  and  selling  of  insurance  and  the  collection  of 
premiums  on  policies  Issued  by  the  insurance  company. 

(d)  The  bank  may  receive  for  services  so  rendered  such  lawful  fees 
or  commissions  as  may  be  agreed  upon  between  the  bank  and 
the  insurance  company  for  which  It  may  act  as  agent. 

(e)  The  bank  is  prohibited  from  assuming  or  guaranteeing  the  pay- 
ment of  any  premium  on  insurance  policies  issued,  through  its 
agency,  by  its  principal. 

(/)  The  bank  is  prohibited  from  guaranteeing  the  truth  of  any  state- 
ment made  by  an  assured  in  filing  his  application  for  insurance. 

(g)  The  powers  conferred  are  to  be  exercised  under  such  regulations 
as  may  be  prescribed  by  the  Comptroller  of  the  Currency. 

In  pursuance  of  the  foregoing  amendment  the  following  regulations 
are  hereby  prescribed  for  National  banks  which  may  undertake  to 
act  as  agents  for  Insurance  companies: 

1.  Each  contract  of  agency  must  be  formally  accepted  by  the  board 
of  directors  of  the  agent  bank  by  a  resolution  spread  upon  the  minutes 
in  the  following  form: 

"Be  it  resolved  that  the  contract  of  agency  entered  into  on   

192..  between  the Insurance  Company  and  the  Na- 
tional Bank  of  ,  by   president  (or  vice-president)   and 

cashier,  a  copy  of  which  is  on  file  in  this  bank,  is  hereby  ratified 

and  approved." 

2.  A  certified  copy  of  such  resolution,  attested  by  the  president  or 
vice-president  and  by  the  cashier  and  by  a  majority  of  the  directors 
of  the  bank,  must  be  forwarded  to  this  office  on  forms  to  be  furnished 
by  this  office. 


30 

3.  There  should  be  on  Cle  in  the  bank,  available  for  inspection  by 
the  Examiner,  the  following  documents: 

(c)  An  authoritative  statement  showing  the  population  of  the  town 
according  to  the  last  preceding  decennial  census. 

(6)  A  proper  certificate  from  the  authorities  of  the  State  in  which 
the  bank  is  located  showing  as  to  each  insurance  company  for 
which  the  bank  is  acting  as  agent  that  such  company  has  re- 
ceived authority  from  the  said  State  to  transact  business  in 
that  State. 

(c)  A  proper  certificate  or  other  writing  of  each  insurance  company 
for  which  the  bank  acts,  authorizing  the  bank  to  act  as  its 
agent,  setting  forth  that  the  bank  does  not  guarantee  the  pay- 
ment of  any  premium  on  insurance  policies  issued  through  its 
agency  by  its  principal,  and  stating  that  the  bank  is  not  to  be 
held  responsible  for  the  truth  of  any  statement  made  by  an 
assured  in  filing  his  application  for  insurance. 

(d)  Copies  of  all  reports  made  by  the  agent  bank  to  each  insurance 
company  which  it  represents. 

4.  The  bank  will  be  required  to  keep  a  record  as  to  each  company 
for  which  it  acts  as  agent,  showing:  For  fire  insurance:  the  amount 
of  each  policy,  the  rate  and  premium,  date  of  commencement,  term, 
and  date  of  expiration,  as  well  as  a  description  of  property  insured, 
with  name  of  assured  and  to  whom  loss  is  payable.  As  to  life  in- 
surance: Amount  and  date  of  policy,  with  premium,  and  a  statement 
as  to  under  what  form  the  insurance  is  written,  giving  also  name 
of  assured  and  beneficiary.  As  to  any  and  all  other  forms  of  insur- 
ance: The  fullest  possible  particulars  as  to  amounts,  dates,  rates, 
premiums,  and  what  is  insured  by  the  policy,  and  of  collections  of 
all  premiums  collected  for  account  of  the  company,  refunds  made,  the 
proportion  of  premium  credited  to  the  profits  of  the  bank  under 
its  agreement  with  the  company,  the  proportion  due  the  company, 
the  amounts  and  dates  of  all  remittances  made  to  the  insurance 
company  on  account  of  premiums  collected,  and  the  balance,  if  any, 
due  from  the  bank  to  the  insurance  company. 

5.  The  bank  will  be  required  to  carry  on  its  general  ledger  an 
account  which  will,  at  all  times,  show  the  amount  due  to  insurance 
companies  for  which  it  is  acting  as  agent,  on  account  of  premiums 
collected  but  not  remitted,  and  this  liability  must  be  shown  in  reports 
of  condition  and  in  the  published  statements  of  the  bank  under  the 
heading  "other  liabilities — on  account  of  insurance  premiums  col- 
lected and  not  remitted,"  unless  specifically  provided  for  in  the 
report. 

6.  The  bank  should  also  keep  such  records  as  may  be  required  by 
each   insurance    company   in   the   manner   and   under   the  forms   pre- 


31 

scribed  by  the  various  companies;  all  of  which  should  be  available 
for  iuspectiou  by  the  Examiner  on  request. 

7.  The  agent  bank  must  not  assume  any  responsibility  or  liability 
for  either  the  adjustment,  settlement,  or  payment  of  losses  under 
any  policy  issued  by  or  through  its  agency. 

8.  The  records  of  all  profits  derived  from  the  insurance  agency 
should  be  carried  in  a  separate  account  on  the  books  of  the  bank, 
and  the  records  should  be  so  kept  as  to  enable  the  Examiner  readily 
to  trace  to  the  source  all  items  of  profit  derived  in  this  connection. 

WHERE  A  NATIONAL  BANK  ACTS  AS  BROKER  OR  AGENT  IN   MAKING  OR  PROCUR- 
ING  LOANS    ON    REAL    ESTATE. 

In  order  to  avail  itself  of  this  privilege: 

(a)  The  bank  must  be  located  in  a  place  the  population  of  which 
does  not  exceed  5000  as  shown  by  the  last  preceding  decennial 
census. 
(6)  The  real  estate  by  which  the  loans  negotiated  are  secured  must 
be  located  within  100  miles  of  the  place  in  which  the  negotiating 
bank  is  located. 
(c)    The  bank  may  receive  for  such  services  a   reasonable  fee  or 

commission. 
(eZ)    The  bank  shall  in  no  case  guarantee  either  the  principal  or 

interest  of  any  such  loans, 
(e)    The  powers  conferred  are  to  be  exercised  under  such  regula- 
tions as  may  be  prescribed  by  the  Comptroller  of  the  Currency. 
The  following  regulations  are  prescribed  for  National  banks  which 
may  undertake  to  act  as  agents  or  brokers  in  making  or  procuring 
loans  on  real  estate: 

1.  A  bank  intending  to  avail  itself  of  this  provision  of  the  law  must 
adopt  by  its  board  of  directors  a  resolution  in  the  following  form: 

"Be  it  resolved,  That  the  officers  of  the  — < National  Bank  of 

are  hereby  authorized  and  empowered  on  behalf  of  this  bank, 

as  broker  or  agent,  to  accept  from  customers  of  this  bank  deposits 
of  funds  to  be  invested  for  account  of  said  customers,  in  lo'ans  secured 
by  real  estate,  and  to  procure,  as  broker  or  agent,  for  customers  of 
this  bank  loans  which  shall  be  secured  by  real  estate,  under  the 
provisions  of  the  Act  approved  September  7,  191G:  Provided,  that  the 
investment  of  such  funds  as  stated,  and  all  such  procuring  of  loans 
or  lending  of  funds  for  clients  shall  be  undertaken  only  under  writ- 
ten instructions  from  the  customer  for  whom  this  bank,  through 
its  officers,  may  act  as  broker  or  agent,  such  written  instructions  in 
each  case  to  be  first  delivered  to  an  officer  of  this  bank.  Such  instruc- 
tions shall,  in  all  cases,  state  clearly  that  the  bank  in  acting  as  broker 


32 

or  agent  In   no  way   guarantees   payment  of   either   the  principal   or 
interest  of  any  loan  so  negotiated." 

2.  A  certified  copy  of  such  resolution,  attested  by  the  president  or 
vice-president  and  cashier  and  by  a  majority  of  the  directors  of 
the  bank,  must  be  forwarded  to  this  office,  on  forms  to  be  furnished 
by  this  office. 

3.  No  bank  shall  charge  more  than  one  commission  or  brokerage 
on  the  making  of  any  loan;  that  is  to  say,  if  it  shall  charge  a  broker- 
age or  commission  to  the  party  borrowing  the  money,  it  shall  not 
charge  a  brokerage  or  commission  to  the  party  to  whom  money  is 
so  loaned,  and  vice  versa. 

4.  Each  bank  acting  under  this  provision  of  law  will  be  required 
to  keep  a  record  showing  as  to  each  loan  negotiated  by  the  bank — 

(a)  The   name  and  address  of  the   principal   for   whom   the   bank 
is  acting. 

(b)  Date  of  written  Instructions   from  the  principal. 

(c)  Name  and  address  of  maker  of  note. 

(d)  Date  of  note. 

(e)  Date  of  maturity  of  note. 

(/)    Brief  description   of  property  securing  note,   showing   location 

and  distance  from  place  in  which  bank  is  located. 
(g)  Character  of  improvements,  etc. 
(7i)    Name  and  address  of  party  to  whom  note  was  transferred  or 

delivered  by  the  bank, 
(i)  Date  of  such  transfer  or  delivery. 
(;')   Amount  of  principal  of  note, 
(fc)  Rate  of  interest  or  discount. 
(I)    Rate  of  commission  or  brokerage  charged  by  bank  for  acting 

as  broker  or  agent. 
(m)    Amount  of  such  commission  or  brokerage,   and  whether  said 

commission  was  paid  the  borrower  of  the  money  or  by  the  party 

for  whom  it  was  loaned. 

5.  A  book  should  be  kept  showing  the  date  on  which  each  mort- 
gage or  deed  of  trust  negotiated  by  the  bank  has  been  admitted  to 
record,  the  court  in  which  the  same  is  recorded,  and  the  recordation 
fees  paid  in  each  case. 

C.  The  records  of  all  profits  derived  from  acting  as  broker  or  agent 
in  negotiating  loans  on  real  estate  should  be  carried  in  a  separate 
account  on  the  books  of  the  bank,  and  the  records  should  be  so  kept 
as  to  enable  the  Examiner  readily  to  trace  to  the  source  all  items 
of  profit  derived  in  this  connection. 

7.  Deposits  of  money  received  by  the  bank  as  broker  or  agent  to 
be  invested  In  loans  secured  by  real  estate  as  prescribed  by  law, 
must  be  treated  as  trust  funds  and  kept  separate  and  apart  from  the 
other  assets  of  the  bank.    Such  funds  must  in  no  case  be  permitted  to 


33 

pass  from  the  possession  of  the  bank  until  the  loan  for  which  they 
are  to  be  paid  out  is  formally  accepted  by  or  in  behalf  of  the  party 
for  whose  account  negotiated. 

8.  No  bank  sball  advance  or  use  its  own  funds  in  connection  with 
real  estate  loans  negotiated  as  broker  or  agent. 

9.  No  loans  secured  by  real  estate,  which  the  bank  has  negotiated 
as  broker  or  agent,  should  become  a  part  of  the  assets  of  the  bank 
even  temporarily,  unless  such  loans  conform  to  the  provisions  of 
section  24  of  the  Federal  Reserve  Act,  as  amended. 

10.  There  should  be  available  in  the  bank  for  inspection  by  the 
National  Bank  Examiner — 

(a)  An  authoritative  statement  showing  the  population  of  the  town 

according  to'  the  last  preceding  decennial  census. 
(&)  All  records  pertaining  to  the  negotiation  of  real  estate  loans  as 

broker  or  agent. 
National  banks  acting  as  broker  for  the  placing  of  loans  should 
prepare  blank  forms  of  application  to  be  executed  by  applicants  for 
loans.    These  applications  should  show — 

(a)  Location  of  property. 

(b)  Acreage. 

(c)  Assessed  valuation. 

(d)  Estimated  present  value. 

(e)  Brief  descriptions  of  buildings  thereon  and  estimated  value  of 
them. 

(f)  Whether  buildings  are  insured,  and,  if  so,  for  what  amounts 
and  in  what  companies. 

(g)  Whether  property  is  already  encumbered,  and,  if  so,  for  what 
amount. 

(h)  If  property  is  farm  property  applicant  should  state  whether  or 
not  the  dwelling  is   provided   with   sanitary   arrangements  ap- 
proved by  the  local  board  of  health,  and,  if  not,  what  sanitary 
arrangements  there  are. 
At  the  foot  of  this  application  should  be  printed  below  the  signa- 
ture of  the  applicant  a  statement  to  the  effect  that  "The  statements 
in  the  foregoing  application  have  been  submitted   to  this  bank  by 
the  applicant  for  the  loan,  but  this  bank  does  not  undertake  to  guar- 
antee the  correctness  of  any  of  the  statements  made  by  the  applicant." 
If  any  applicant   for   a  loan   makes  statements  in   his   application 
which   any   officers  of  the   bank  before   whom   the    application   may 
come  may  have  reason  to  think  are  not  correct,  the  attention  of  the 
applicant  should  be  called  to  the  possible  discrepancy. 

§  20.  Amount  of  Capital  Required. — No   association   shall  be 
organized  with  a  less  capital  than  one  hundred  thousand  dollars, 
3 


34 

except  that  banks  with  a  capital  of  not  less  than  fifty  thousand 
dollars  may,  with  the  approval  of  the  Secretary  of  the  Treasury, 
be  organized  in  any  place  the  population  of  which  does  not  exceed 
six  thousand  inhabitants,  and  except  that  banks  with  a  capital  of 
not  less  than  twenty-five  thousand  dollars  may,  with  the  sanction 
of  the  Secretary  of  the  Treasury,  be  organized  in  any  place  the 
population  of  which  does  not  exceed  three  thousand  inhabitants. 
No  association  shall  be  organized  in  a  city  the  population  of 
which  exceeds  fifty  thousand  persons  with  a  capital  of  less  than 
two  hundred  thousand  dollars.  (Rev.  Stat.  IT.  S.  Sec.  5138,  as 
amended  by  Act  March  14,  1900,  Ch.  41,  Sec.  10,  31  Stat.  L.,  48.) 

Determination  of  Population. — When  there  is  any  question  as  to  the 
population  of  a  place  being  within  the  limit  of  the  requirement  of  the 
law,  the  Comptroller  obtains  from  the  Census  Bureau  and  from  other 
sources  as  full  information  as  possible.  In  case  the  applicants  to 
organize  a  National  bank  believe  the  population  reported  to  the  Comp- 
troller not  correct,  they  may  furnish  such  counter  evidence  as  they 
may  be  able  to  obtain.  A  certificate  from  the  mayor  of  the  place  or 
other  good  evidence  of  actual  population  probably  will  be  considered. 
Any  error  of  the  Comptroller  as  to  population  can  be  corrected  in 
appropriate  legal  proceedings.  It  sometimes  happens  that  banks  have 
less  than  the  minimum  capital  required  by  law  for  the  population  of 
the  place.  The  explanation  is  that  they  were  either  organized  when 
the  places  were  smaller,  or  were  organized  in  villages  afterward  ab- 
sorbed by  adjacent  cities. 

Authorization  of  Banks  Under  $100,000  Capital. — When  application 
is  made  to  the  Comptroller  for  a  bank  with  less  than  $100,000  capital, 
he  certifies  the  application,  with  statement  as  to  population,  etc.,  to  the 
Secretary  of  the  Treasury,  who  thereupon  takes  action  and  approves  or 
not  as  he  deems  best. 

§  21.  Par  Value  of  Stock — Transfers — Stockholders'  Rights 
and  Liabilities. —  The  capital  stock  of  each  association  shall  be 
divided  into  shares  of  one  hundred  dollars  each,  and  be  deemed 
personal  property,  and  transferable  on  the  books  of  the  associa- 
tion in  such  manner  as  may  be  prescribed  in  the  by-laws  or  articles 
of  association.  Every  person  becoming  a  shareholder  by  such 
transfer  shall,  in  proportion  to  his  shares,  succeed  to  all  the  rights 
and  liabilities  of  the  prior  holder  of  such  shares;  and  no  change 


35 

shall  be  made  in  the  articles  of  association  by  which  the  rights, 
remedies  or  security  of  the  existing  creditors  of  the  association 
shall  be  impaired.     (Rev.  Stat.  U.  S.  Sec.  5139.) 

The  exception  to  the  division  into  shares  of  $100  each  is  only  in  case 
of  State  banks  converted.  (See  $31.)  If  a  converting  bank  de- 
sires to  change  the  denomination  of  its  shares,  the  new  denomination 
must  be  $100. 

See  also  §§  45  and  4G  for  the  liability  of  shareholders. 

State  Statutes. — A  State  law  cannot  limit  the  transferable  quality 
of  National  bank  stock.  (Doty  v.  First  National  Bank  of  Larimore,  3 
N.  D.,  9.)  But  a  state  court  may  order  a  new  certificate  to  issue 
though  the  by-laws  require  the  production  of  the  old  certificate  before 
the  issue  of  a  new  one.  (Letcher  v.  German  Nat.  Bank,  119  S.  W.  Rep. 
(Ky.)(  236.)  So,  a  State  statute  prescribing  the  mode  of  transfer  of 
stock  by  executors  will  apply  to  the  stock  of  a  National  bank  located  in 
such  State.  (Hobbs  v.  Western  Nat.  Bank,  Fed.  Case  No.  6551a.) 
And  it  is  held  that  a  State  statute  which  provides  that  the  stock- 
holders of  all  private  corporations  shall  have  the  right  of  access  to 
and  inspection  and  examination  of  the  books,  records  and  papers  of 
the  corporation  at  all  reasonable  and  proper  times,  applies  to  Na- 
tional banks  located  within  the  State.  (Winter  v,  Baldwin,  89  Ala., 
483;  Murray  v.  Walker,  156  Ky.,  536.)  And  National  bank  stock  is  sub- 
ject to  seizure  and  sale  on  execution  under  authority  of  State  laws. 
(In  re  Braden's  Estate,  165  Pa.  St.,  184.) 

Transfer  of  Stock — Entry  of  Transfer — Lost  Certificates. — The 
transfer  of  stock  in  National  banks  is  not  governed  by  different  rules 
from  those  which  are  ordinarily  applied  to  the  transfer  of  stock  in 
other  corporations.  (Johnson  v.  Laflin,  103  U.  S.,  800.)  The  entry 
of  the  transaction  in  the  books  of  the  bank  is  required,  not  for  the 
purpose  of  passing  the  title  from  seller  to  buyer,  but  for  the  protec- 
tion of  the  parties,  and  others  dealing  with  the  bank,  and  to  enable 
the  bank  to  know  who  are  its  stockholders.  (Id.)  See  also  Gray  v. 
Faulkhauser,  58  Oregon,  423.  Accordingly,  it  has  been  held  by  the 
Supreme  Court  of  the  United  States  that  where  the  shareholder  de- 
livers his  certificates  of  stock  to  the  purchaser,  with  a  blank  power  of 
attorney  to  make  the  transfer  on  the  books  of  the  bank,  and  receives 
the  purchase-money,  the  sale  is  coinplete  and  the  title  passes  from 
seller  to  buyer.  (Id.)  And  so  it  has  been  decided  that  where  a  share- 
holder who  has  sold  his  stock  delivers  the  certificates  with  a  proper 
power  of  attorney  to  the  cashier  with  a  request  that  the  transfer  be 
made  upon  the  books,  and  the  cashier  promises  so  to  do,  the  transferror 


36 

has  done  all  that  Is  legally  required  of  him  to  divest  himself  of  the 
liability  of  a  stockholder,  and  should  the  cashier  fail  to  make  the  trans- 
fer on  the  books,  the  transferror  can  not  be  held  as  a  stockholder  in 
case  the  bank  should  afterwards  become  insolvent.  (Hayes  v.  Shoe- 
maker, 39  Fed.  Rep.,  319;  Young  v.  McKay,  50  Fed.  Rep.,  397.)  When 
a  certificate  of  stock  is  left  with  the  officers  of  the  bank  to  be  trans- 
ferred on  the  books,  the  transfer  takes  place  at  the  time  when  it  Is 
so  left,  and  not  at  the  time  of  actual  entry  in  the  books,  provided  the 
party  leaving  it  has  authenticated  to  the  officers  of  the  bank  his  in- 
tention to  make  such  transfer  in  the  manner  prescribed  by  the  by- 
laws of  the  bank.  (Young  v.  McKay,  50  Fed.  Rep.,  394.)  The  rights 
of  a  transferee  of  National  bank  stock,  under  an  unrecorded  transfer, 
good  at  common  law,  are  superior  to  the  rights  of  a  subsequent  at- 
taching creditor  of  the  transferror  without  notice.  (Doty  v.  First 
Nat.  Bank  of  Larimo're,  3  N.  D.,  9.) 

For  What  Purpose  Transfer  on  Books  Necessary. — Until  the  trans- 
fer is  recorded,  the  corporation  Is  not  bound  to  recognize  the  transferee 
as  a  stcokholder,  and  he  is  not  entitled  to  vote  upon  the  stock,  or  to 
receive  the  dividends  thereon,  or,  in  fact,  to  have  any  of  the  privileges 
of  a  stockholder.  The  transferror  also  has  an  interest  in  having  the 
transfer  registered,  because  he  will  not  be  discharged  from  his  liability 
as  a  stockholder  until  this  is  done. 

The  record  made  of  the  transfer  upon  the  books  of  the  bank  is  suf- 
ficient, as  between  the  transferee  and  the  bank,  to  work  a  change  of 
ownership,  and  new  certificates  are  not  necessary  to  his  becoming  the 
owner  of  the  stock  so  transferred.  (Keyser  v.  Hitz,  133  U.  S.,  438.) 
Subscription  to  stock  and  payment  in  full  and  entry  of  his  name  on 
the  books  as  a  stockhtilder  makes  the  subscriber  a  shareholder  without 
taking  out  a  certificate.  (Pacific  National  Bank  v.  Eaton,  141  U.  S., 
227;  Thayer  v.  Butler,  141  U.  S.,  234;  Butler  v.  Eaton,  141  U.  S.,  240.) 

In  case  of  loss  of  a  certificate  of  stock  a  bond  of  indemnity  should  be 
required  before  the  issue  of  a  duplicate  certificate  to  avoid  the  possi- 
bility of  the  bank  becoming  liable  for  an  Illegal  issue. 

Right  of  Stockholders  to  Transfer. — A  shareholder  in  a  National 
bank,  while  it  is  a  going  concern,  has  the  absolute  right,  in  the  ab- 
sence of  fraud  to  make  a  bona  fide  and  actual  sale  and  transfer  of  his 
shares  at  any  time,  to  any  person  capable  in  law  of  purchasing  and 
holding  the  same,  and  this  right  is  not  subject,  in  such  cases,  to  the 
control  of  the  directors  or  other  stockholders.  (Johnson  v.  Laflin,  5 
Dill,  65.)  The  directors  are  authorized  to  prescribe  regulations  under 
which  the  transfer  of  stock  shall  be  made;  but  these  regulations  must 
be  reasonable,  and  under  the  pretence  of  prescribing  the  manner 
thereof,  the  directors  can  not  clog  the  transfer  with  useless  restric- 


37 

tions.  (Johnson  v.  Laflin,  103  U.  S.,  800.)  The  transfer  does  not  re- 
quire approval  by  the  directors,  nor  can  they  decline  to  make  it  in  a 
proper  case.  {Id.)  But  where  the  transfer  is  sought  to  be  made  to 
a  person  incapable  in  law  of  assuming  the  liabilities  of  a  stockholder 
— as  where  it  is  made  to  an  infant,  or  to  a  person  of  unsound  mind — 
then  the  directors  might  refuse  to  permit  the  transfer  to  be  registered, 
for  such  a  transfer  is  a  fraud  upon  the  corporation,  the  stockholders 
and  creditors.  And  so  they  might  refuse  where  the  transfer  is  evi- 
dently made  merely  for  the  purpose  of  escaping  liability,  as  where  a 
shareholder  in  an  insolvent  bank  seeks  to  transfer  his  stock  to  a 
pauper,  or  man  of  straw,  or  to  an  insolvent  or  irresponsible  person. 
Where  the  person  intrusted  by  the  directors  with  the  duty  of  entering 
the  transfers  on  the  books  of  the  bank,  refuses  for  insufficient  reason 
to  note  a  transfer,  the  bank  will  be  liable  for  damages  resulting  there- 
from. (Case  v.  Citizens'  Bank,  100  U.  S.,  446,  see  also  Hazard  v.  Bank, 
26  Fed.,  94.) 

Specific  Performance. — A  court  of  equity  will  not  enforce  specific 
performance  of  an  agreement  to  sell  shares  in  a  National  bank  to 
enable  the  purchaser  to  obtain  control  of  the  bank,  for  the  reason 
that,  (1)  equity  will  not  generally  enforce  specific  execution  of  a 
contract  relating  to  personal  chattels,  and  (2)  because  a  decree  en- 
forcing the  agreement  in  question  would  be  against  public  policy. 
(Foil's  Appeal,  21  Alb.,  L.  J.;  2  N.  B.  C,  411;  but  see  Owinge  v. 
Lehman,  190  111.  App.,  432.) 

National  Bank  Stock  Not  an  Interest-Bearing  Security. — While 
the  shares  of  stock  in  a  National  bank  are  securities,  they  are  not  in- 
terest-bearing, and  hence  a  provision  in  a  will  directing  the  executors 
to  invest  the  funds  of  the  estate  in  interest-bearing  securities  does 
not  authorize  an  investment  in  National  bank  stock.  (Williams  v. 
Cobb,  219  Fed.  Rep.,  663.) 

§  22.  When  Capital  Stock  Must  be  Paid  In.— At  least  fifty  per 
centum  of  the  capital  stock  of  every  association  shall  be  paid 
in  before  it  shall  be  authorized  to  commence  business;  and  the 
remainder  of  the  capital  stock  of  such  association  shall  be  paid 
in  installments  of  at  least  ten  per  centum  each,  on  the  whole 
amount  of  the  capital  as  frequently  as  one  installment  at  the  end 
of  each  succeeding  month  from  the  time  it  shall  be  authorized  by 
the  Comptroller  of  the  Currency  to  commence  business;  and  the 
payment  of  each  installment  shall  be  certified  to  the  Comptroller, 


38 

under  oath,  by  the  president  or  cashier  of  the  association.     (Rev. 
Stat.  U.  S.  Sec.  5140.) 

Fayjlent  of  Subscriptions. — The  Comptroller  now  requires  that 
each  shareholder  listed  in  the  Organization  Certificate,  or  his  assignee, 
shall  have  paid  in  fifty  per  cent,  on  stock  held  by  him,  and  further 
that  the  list  of  shareholders  in  the  aforesaid  certificate  shall  include 
all  subscribers  to  the  stock  and  not  be  a  list  of  a  few  subscribers  tak- 
ing the  full  stock  in  their  names  and  paying  for  it,  while  an  under- 
standing or  agreement  exists  with  other  parties  that  they  are  to 
transfer  a  certain  amount  to  them  on  payment  for  the  shares.  But 
where  there  is  no  subscription  paper,  and  parties  in  order  to  expedite 
charter  are  listed  as  the  entire  original  shareholders  in  Organization 
Certificate  and  pay  in  their  pro  rata  fifty  per  cent,  on  the  capital,  this 
would  meet  the  requirements  of  the  law,  and  if  the  corporators  later 
should  wish  to  distribute  some  of  their  holdings  there  could  be  no 
legal  objection.  The  Comptroller's  purpose  is  to  avoid  speculation  in 
the  original  stock  of  banks  organizing. 

The  Comptroller's  office  furnishes  blanks  for  certifying  payments  on 
capital.     For  form,  see  $§  397  and  398. 

§  23.  Failure  to  Pay  Installments  on  Stock — Sale  of  Stock — 
Restoring  Capital  so  Reduced. — Whenever  any  shareholder,  or  his 
assignee,  fails  to  pay  any  installment  on  the  stock  when  the  same 
is  required  by  the  preceding  section  to  be  paid,  the  directors  of 
such  association  may  sell  the  stock  of  such  delinquent  shareholder 
at  public  auction,  having  given  three  weeks'  previous  notice  thereof 
in  a  newspaper  published  and  of  general  circulation  in  the  city  or 
county  where  the  association  is  located,  or  if  no  newspaper  is 
published  in  said  city  or  county,  then  in  a  newspaper  published 
nearest  thereto,  to  any  person  who  will  pay  the  highest  price  there- 
for, to  be  not  less  than  the  amount  then  due  thereon,  with  the 
expenses  of  advertisement  and  sale ;  and  the  excess,  if  any,  shall  bo 
paid  to  the  delinquent  shareholder.  If  no  bidder  can  be  found 
who  will  pay  for  such  stock  the  amount  due  thereon  to  the  as- 
sociation, and  the  cost  of  advertisement  and  sale,  the  amount  pre- 
viously paid  shall  be  forfeited  to  the  association,  and  such  stock 
shall  be  sold  as  the  directors  may  order  within  six  months  from 
the  time  of  such  forfeiture,  and  if  not  sold  it  shall  be  cancelled 
and  deducted  from  the  capital  stock  of  the  association.    If  any  such 


39 

cancellation  and  reduction  shall  reduce  the  capital  of  the  asso- 
ciation below  the  minimum  of  capital  required  by  law,  the  capital 
stock  shall,  within  thirty  days  from  the  date  of  such  cancellation, 
be  increased  to  the  required  amount;  in  default  of  which  a  re- 
ceiver may  be  appointed,  according  to  the  provisions  of  section 
fifty-two  hundred  and  thirty-four,  to  close  up  the  business  of  the 
association.     (Eev.  Stat.  U.  S.  Sec.  5141.) 

Legal  Status  of  Stock. — It  must  be  remembered  that  from  the  time 
of  his  subscription  a  person  becomes  a  shareholder,  and  that  all  the 
shareholders  have  entered  into  a  contract  among  themselves,  and  are 
mutually  responsible  to  each  other.  The  stock  doubtless  has  a  legal 
standing  before  a  single  payment  is  made,  and  the  association  may  be 
legally  organized  and  become  a  body  corporate  before  a  single  dollar 
of  the  capital  is  paid  in  by  anyone.  Thus  sales  or  transfers  of  stock 
may  take  place  before  any  capital  is  paid  in.  This  is  in  line  with  the 
decision  of  the  United  States  Supreme  Court  in  Van  Allen  v.  Assessors 
(3  Wall.,  573),  which  holds  a  share  of  stock  to  be  an  entity  distinct 
from  capital.  The  actual  holder  or  subscriber,  in  whose  name  the 
stock  stands  on  the  books  of  the  bank  at  the  time  the  directors  call 
for  the  payment  of  the  first  installment  of  50  per  cent.,  must  pay  it, 
and  payment  can  doubtless  be  compelled  by  legal  proceedings.  The 
section  under  consideration  does  not  refer  to  this  first  installment,  but 
to  the  subsequent  installments,  the  dates  of  payment  of  which  were 
fixed  by  the  preceding  section.  The  whole  tenor  of  section  5141  im- 
plies a  pervious  payment  of  50  per  cent,  which  is  in  the  nature  of  a 
forfeit,  if  the  stock  has  to  be  sold  on  account  of  failure  to  meet  the 
subsequent  installments. 

Limit  of  Time  foe  Paying  in  Capital. — A  new  association  would 
strictly,  under  this  section,  have  the  following  time  to  make  good  its 
capital  before  a  receiver  could  be  appointed;  First,  the  time  until  the 
installment  became  due;  then  three  weeks  for  notice  by  publication: 
then  six  months  from  forfeiture  to  cancellation;  and,  finally,  thirty 
days  longer  in  which  to  bring  up  capital  to  required  amount.  How 
capital  is  to  be  made  good  in  such  case  is  not  distinctly  stated,  but 
probably  by  assessment  on  remaining  stockholders. 

State  Statute  not  Applicable. — A  State  statute  which  prescribes  a 
mode  of  procedure  in  favor  of  judgment  creditors  against  delinquent 
shareholders  is  not  applicable  to  National  banks,  though  by  its  terms 
it  purports  to  apply  to  all  corporations.  (MoQuiddy  v.  King,  191  Ala., 
205.) 


40 

§  24.  Comptroller  to  Determine  if  Association  is  Entitled  to 
Commence  Business. —  Whenever  a  certificate  is  transmitted  to 
the  Comptroller  of  the  Currency,  as  provided  in  this  Title,  and 
the  association  transmitting  the  same  notifies  the  Comptroller  that 
at  least  fifty  per  centum  of  its  capital  stock  has  been  duly  paid  in, 
and  that  such  association  has  complied  with  all  the  provisions  of 
this  Title  required  to  be  complied  with  before  an  association  shall 
be  authorized  to  commerce  the  business  of  banking,  the  Comp- 
troller shall  examine  into  the  condition  of  such  association,  as- 
certain especially  the  amount  of  money  paid  in  on  account  of  its 
capital,  the  name  and  place  of  residence  of  each  of  its  directors, 
and  the  amount  of  the  capital  stock  of  which  each  is  the  owner  in 
good  faith,  and  generally  whether  such  association  has  complied 
with  all  the  provisions  of  this  Title  required  to  entitle  it  to  en- 
gage in  the  business  of  banking;  and  shall  cause  to  be  made  and 
attested  by  the  oaths  of  a  majority  of  the  directors,  and  by  the 
president  or  casher  of  the  association,  a  statement  of  all  the  facts 
necessary  to  enable  the  Comptroller  to  determine  whether  the 
association  is  lawfully  entitled  to  commence  the  business  of  bank- 
ing.    (Eev.  Stat.  U.  S.  Sec.  5168.) 

Preliminary  Examination. — The  Comptroller  orders  an  examination 
of  local  conditions  and  the  status  of  the  organizers  and  proposed  offi- 
cers to  be  made  by  the  nearest  available  examiner  prior  to  approving 
the  application  to  organize  and  this  preliminary  examination  suffices 
in  practically  all  cases. 

See  Chapter  I,  Part  IV,  for  full  details. 


§  25.  Certificate  of  Authority  to  Commence  Business.— If ,  upon 
a  careful  examination  of  the  facts  so  reported,  and  of  any  other 
facts  which  may  come  to  the  knowledge  of  the  Comptroller, 
whether  by  means  of  a  special  commission  appointed  by  him  for 
the  purpose  of  inquiring  into  the  condition  of  such  association,  or 
otherwise,  it  appears  that  such  association  is  lawfully  entitled  to 
commence  the  business  of  banking,  the  Comptroller  shall  give  to 
such  association  a  certificate,  under  his  hand  and  official  seal,  that 
such  association  has  complied  with  all  the  provisions  required  to 
be  complied  with  before  commencing  the  business  of  banking, 


41 

and  that  such  association  is  authorized  to  commence  such  business. 
But  the  Comptroller  may  withhold  from  an  association  his  cer- 
tificate authorizing  the  commencement  of  business,  whenever  he 
has  reason  to  suppose  that  the  shareholders  have  formed  the  same 
for  any  other  than  the  legitimate  objects  contemplated  by  this 
Title.     (Eev.  Stat.  TJ.  S.  Sec.  5169.) 

See  note  to  preceding  section.  The  certificate  named  in  this  section 
is  the  bank's  charter,  that  is,  its  authority  to  do  business. 

§  26.  Publication  of  Comptroller's  Certificate. — The  association 
shall  cause  the  certificate  issued  under  the  preceding  section  to 
be  published  in  some  newspaper  printed  in  the  city  or  county 
where  the  association  is  located  for  at  least  sixty  days  next  after 
the  issuing  thereof;  or,  if  no  newspaper  is  published  in  such  city 
or  county,  then  in  the  newspaper  published  nearest  thereto.  (Eev. 
Stat.  U.  S.  Sec.  5170.) 

This  refers  to  the  certificate  of  authority  to  begin  business.  An  in- 
sertion in  a  weekly  newspaper  or  in  a  weekly  edition  of  a  daily  news- 
paper during  the  sixty  days  is  sufficient.  The  Comptroller  requires  the 
publisher's  oath  of  publication  and  a  copy  of  the  paper  containing 
the  notice  as  evidence  of  publication  for  the  time  required. 

§  27.  Increase  of  Capital  Stock. — Any  National  banking  asso- 
ciation may,  with  the  approval  of  the  Comptroller  of  the  Currency, 
by  the  vote  of  shareholders  owning  two-thirds  of  the  stock  of  such 
association,  increase  its  capital  stock,  in  accordance  with  existing 
laws,  to  any  sum  approved  by  the  said  Comptroller,  notwithstand- 
ing the  limit  fixed  in  its  original  articles  of  association  and  deter- 
mined by  said  Comptroller ;  and  no  increase  of  the  capital  stock  of 
any  National  banking  association,  either  within  or  beyond  the 
limit  fixed  in  its  original  articles  of  association,  shall  be  made 
except  in  the  manner  herein  provided.  (Act  May  1,  1886,  Ch.  73, 
Sec.  1 ;  24  Stat.  L.,  18.) 

Obsolete  Peovisions  in  Abttcles  of  Association. — Prior  to  the  Act 
of  1886,  the  statute  provided  that  "Any  association  formed  under  this 
title  may,  by  its  articles  of  association,  provide  for  an  increase  of  its 
capital  from  time  to  time,  as  may  be  deemed  expedient,  subject  to  the 


42 

limitations  of  this  title.  But  the  maximum  of  such  increase  to  be  pro- 
vided in  the  articles  of  association  shall  be  determined  by  the  Comp- 
troller of  the  Currency."  (Rev.  Stat.  U.  S.,  Sec.  5142.)  Many  banks, 
therefore,  have  a  provision  of  this  character  in  their  articles  of  asso- 
ciation. But  this  is  noW  obsolete.  It  is  no  longer  necessary  to  insert 
in  the  articles  of  association  provisions  for  an  increase  of  capital  stock; 
for  shareholders  owning  two-thirds  of  the  shares  may  increase  the 
capital  stock  at  any  time  and  to  any  amount,  subject  only  to  the  ap- 
proval of  the  Comptroller  of  the  Currency,  and  this  notwithstanding 
that  the  articles  of  association  contain  a  provision  fixing  a  maximum 
limit. 

By  Whom  Increase  Authorized. — The  increase  must  now  be  made 
by  the  shareholders,  and  not  by  the  directors,  and  all  provisions  in 
the  articles  of  association  of  banks  organized  prior  to  May  1,  1886,  au- 
thorizing directors  to  increase  the  stock,  have  become  wholly  nugatory. 

Right  of  Shareholders  to  Subscribe  for  New  Shares. — It  is  a  gen- 
eral rule  of  law  that  where  the  capital  stock  of  a  corporation  is  in- 
creased each  shareholder  has  a  right  of  pre-emption  to  the  new  stock 
in  proportion  to  his  shares  in  the  original  stock.  (Stokes  v.  Con- 
tinental Trust  Co.,  186  N.  Y.,  285.) 

§  28.  When  Increase  of  Capital  Stock  Becomes  Valid. — No  in- 
crease of  capital  shall  be  valid  until  the  whole  amount  of  such 
increase  is  paid  in,  and  notice  thereof  has  been  transmitted  to 
the  Comptroller  of  the  Currency,  and  his  certificate  obtained 
specifying  the  amount  of  such  increase  of  capital  stock,  with  his 
approval  thereof,  and  that  it  has  been  duly  paid  in  as  part  of  the 
capital  of  such  association.     (Eev.  Stat.  IT.  S.  Sec.  5142.) 

Comptroller's  Atfroval — Recovery  of  Money  Paid  Where  Increase 
Not  Made. — The  stock  of  a  National  bank  can  not  be  lawfully  increased 
before  the  entire  amount  of  the  new  capital  has  been  paid  in  and  the 
Comptroller  of  the  Currency  has  certified  to  the  increase  and  to  the 
fact  of  payment  in  the  mode  prescribed  by  Section  5142,  Rev.  Stat. 
U.  S.  (McFarlin  v.  National  Bank  of  Kansas  City,  68  Fed.  Rep.,  868; 
Charleston  v.  People's  Nat.  Bank,  5  S.  C,  103.)  And  the  provision  of 
the  statute  as  to  payment  does  not  create  a  condition,  express  or  im- 
plied, that  shares  subscribed  and  paid  for  in  full  are  not  valid  unless 
the  entire  amount  of  the  proposed  increase  is  subscribed  and  paid  for 
in  full.  (Scott  v.  Latimer,  89  Fed.  Rep.,  843.)  Where  money  paid  in 
on  subscriptions  to  an  increase  of  capital  is  received  by  a  bank  as 


43 

a  trust  fund  to  be  applied  to  that  purpose,  and  before  the  increase  is 
approved  by  the  Comptroller  and  his  certificate  issued,  the  bank  fails, 
the  money  so  paid  may  be  recovered  by  the  subscribers.   {Id.) 

Where  Whole  Amount  of  Increase  is  Not  Taken. — 'The  U.  S.  Su- 
preme Court  in  the  case  of  Aspinwall  v.  Butler,  133  U.  S.,  565,  has  held 
that  where  an  increase  of  the  capital  stock  is  authorized  In  a  certain 
sum  there  is  no  implied  condition  that  a  subscription  shall  be  void 
if  the  whole  amount  so  authorized  is  not  subscribed.  (See  also  Delano 
v.  Butler,  118  U.  S.,  634.)  Therefore,  where  a  shareholder  subscribes 
his  additional  share  towards  doubling  the  capital  and  pays  his  sub- 
scriptions, the  fact  that  the  stockholders,  with  the  assent  of  the  Comp- 
troller, reduce  the  amount  of  the  stock  they  had  proposed  to  issue, 
does  not  permit  him  to  repudiate  his  subscription  and  recover  the 
money  paid  on  it.  (Pacific  National  Bank  v.  Eaton,  141  U.  S.,  227.) 
But  if  there  were  a  large  and  material  deficiency  in  the  amount  of 
capital  contemplated,  equity  might  interfere  to  protect  subscribers. 
(Aspinwall  v.  Butler,  133  U.  S.,  595;  Matthews  v.  Columbia  Nat.  Bank, 
79  Fed.  Rep.,  558.) 

In  an  action  to  recover  money  deposited  with  a  National  bank  the 
plaintiff  may  show  that  stock  issued  by  the  bank  in  his  name  was  is- 
sued to  him  merely  as  collateral  security  for  such  deposit.  (Williams 
v.  American  National  Bank  of  Arkansas  City,  85  Fed.  Rep.,  376.)  And 
it  is  no  defense  to  the  bank  that  the  stock  was  issued  without  au- 
thority of  law.     {Id.) 

§  29.  Reduction  of  Capital  Stock. — Any  association  formed  un- 
der this  title  may,  by  the  vote  of  shareholders  owning  two-thirds 
of  its  capital  stock,  reduce  its  capital  to  any  sum  not  below  the 
amount  required  by  this  title  to  authorize  the  formation  of  associa- 
tions; but  no  such  reduction  shall  be  allowable  which  will  reduce 
the  capital  of  the  association  below  the  amount  required  for  its 
outstanding  circulation,  nor  shall  any  reduction  be  made  until  the 
amount  of  the  proposed  reduction  has  been  reported  to  the  Comp- 
troller of  the  Currency  and  such  reduction  has  been  approved  by 
the  said  Comptroller  of  the  Currency  and  by  the  Federal  Eeserve 
Board,  or  by  the  organization  committee  pending  the  organization 
of  the  Federal  Eeserve  Board.  (Eev.  Stat.  IT.  S.  Sec.  5143,  as 
amended  by  Sec.  28,  Act  Dec.  23.  1913;  38  Stat.  L.,  274.) 

Reduction  of  Capital  to  Meet  Impairment. — In  reduction  to  meet 
impairment  of  capital  there  can  be  no  withdrawal  of  assets;  for,  prima 


44 

facie,  any  further  withdrawal  of  assets  would  result  in  still  further  im- 
pairment of  the  capital.  (McCann  v.  First  National  Bank  of  Jefferson- 
ville,  112  Ind.,  354.)  But  the  stockholders  have  a  right  to  provide  that 
the  assets  charged  off  shall  be  set  aside  as  a  trust  fund  for  the  benefit 
of  the  stockholders.  (Jerome  v.  Cogswell,  78  Conn.,  75;  204  U.  S.  1.) 
and  in  each  case  the  right  to  participate  in  the  distribution  of  such 
fund  is  vested  in  those  who  are  stockholders  at  the  time  of  the  re- 
duction.    (Id.) 


§  30.  Depositaries  of  Public  Moneys. — All  National  banking 
associations,  designated  for  that  purpose  by  the  Secretary  of  the 
Treasury,  shall  be  depositaries  of  public  money,  under  such  regula- 
tions as  may  be  prescribed  by  the  Secretary;  and  they  may  also 
be  employed  as  financial  agents  of  the  Government;  and  they 
shall  perform  all  such  reasonable  duties,  as  depositaries  of  public 
money  and  financial  agents  of  the  Government,  as  may  be  required 
of  them.  The  Secretary  of  the  Treasury  shall  require  the  asso- 
ciations thus  designated  to  give  satisfactory  security,  by  the  de- 
posit of  "United  States  bonds  and  otherwise,  for  the  safe-keeping 
and  prompt  payment  of  the  public  money  deposited  with  them, 
and  for  the  faithful  performance  of  their  duties  as  financial  agents 
of  the  Government:  Provided,  That  the  Secretary  shall,  on  or 
before  the  first  of  January  of  each  year,  make  a  public  statement 
of  the  securities  required  during  that  year  for  such  deposits.  And 
every  association  so  designated  as  receiver  or  depositary  of  the 
public  money  shall  take  and  receive  at  par  all  of  the  national  cur- 
rency bills,  by  whatever  association  issued,  which  have  been  paid 
into  the  Government  for  internal  revenue,  or  for  loans  or  stocks : 
Provided,  That  the  Secretary  of  the  Treasury  shall  distribute  the 
deposits  herein  provided  for,  as  far  as  practicable,  equitably  be- 
tween the  different  States  and  sections.  (Rev.  Stat.  TJ.  S.  Sec. 
5153,  as  amended  by  Act  March  3,  1901,  Ch.  871 ;  31  Stat.  L., 
1448 ;  Act  March  4,  1907,  Ch.  2913,  Sec.  3 ;  34  Stat.  L.,  1290.) 


See  Section  15  of  Federal  Reserve  Act,  page  275,  requiring  the  de- 
posit of  Government  funds  in  either  Federal  Reserve  banks  or  member 
banks.  For  additional  information  as  to  Government  depositories  Bee 
Part  III,  Ch.  III. 


45 

§  31.  Conversion  of  State  into  National  Banks. — Any  bank  in- 
corporated by  special  law  of  any  State  or  of  the  United  States 
or  organized  under  the  general  laws  of  any  State  or  of  the  United 
States  and  having  an  unimpaired  capital  sufficient  to  entitle  it  to 
become  a  National  banking  association  under  the  provisions  of  the 
existing  laws  may,  by  the  vote  of  the  shareholders  owning  not  less 
than  fifty-one  per  centum  of  the  capital  6tock  of  such  bank  or 
banking  association,  with  the  approval  of  the  Comptroller  of  the 
Currency  be  converted  into  a  National  banking  association,  with 
any  name  approved  by  the  Comptroller  of  the  Currency: 

Provided,  however,  That  said  conversion  shall  not  be  in  contra- 
vention of  the  State  law.  In  such  case  the  articles  of  association 
and  organization  certificate  may  be  executed  by  a  majority  of  the 
directors  of  the  bank  or  banking  institution,  and  the  certificate 
shall  declare  that  the  owners  of  fifty-one  per  centum  of  the  capital 
stock  have  authorized  the  directors  to  make  such  certificate  and  to 
change  or  convert  the  bank  or  banking  institution  into  a  National 
association.  A  majority  of  the  directors,  after  executing  the  ar- 
ticles of  association  and  the  organization  certificate,  shall  have 
power  to  execute  all  other  papers  and  to  do  whatever  may  be  re- 
quired to  make  its  organization  perfect  and  complete  as  a  National 
association.  The  shares  of  any  such  bank  may  continue  to  be  for 
the  same  amount  each  as  they  were  before  the  conversion,  and  the 
directors  may  continue  to  be  directors  of  the  association  until 
others  are  elected  or  appointed  in  accordance  with  the  provisions 
of  the  statutes  of  the  United  States.  When  the  Comptroller  has 
given  to  such  bank  or  banking  association  a  certificate  that  the 
provisions  of  this  Act  have  been  complied  with,  such  bank  or 
banking  association,  and  all  its  stockholders,  officers,  and  em- 
ployees, shall  have  the  same  powers  and  privileges,  and  shall  be 
subject  to  the  same  duties,  liabilities,  and  regulations,  in  all  re- 
spects, as  shall  have  been  prescribed  by  the  Federal  Reserve  Act 
and  by  the  National  banking  Act  for  associations  originally  or- 
ganized as  National  banking  associations.  (Rev.  Stat.  U.  S.  Sec. 
5154,  as  amended  Sec.  8,  Act.  Dec.  23,  1913;  38  Stat.  L.,  258.) 

For  further  Information  on  this  subject  see  Ch.  IV.,  Part  IV. 


46 

Authority  Required. — Many  States  have  passed  enabling  acts,  both 
to  enable  State  banks  to  become  National  banks  and  to  enable  National 
banks  to  become  State  banks. 

CoitroRATE  Relation  to  Old  Bank; — 'The  conversion  of  a  State  bank 
into  a  National  bank  does  not  destroy  its  identity  or  its  corporate  ex- 
istence; it  is  not  a  closing  of  business,  but  simply  a  continuation  of 
the  same  body,  with  the  same  officers  and  stockholders,  the  same  prop- 
erty, assets  and  business  of  banking  under  a  changed  jurisdiction. 
(Metropolitan  Nat.  Bank  v.  Clagett,  141  U.  S.,  520.)  The  conversion 
and  change  of  name  do  not  affect  its  right  to  sue  on  liabilities  incurred 
to  it  under  its  former  name.  (Michigan  Insurance  Bank  v.  Eldred,  143 
U.  S.,  293;  City  Nat.  Bank  v.  Phelps,  97  N.  Y.,  44.)  And  conversely 
the  National  bank  is  liable  after  the  conversion  for  all  the  obligations 
of  the  old  institution.  (Coffee  v.  National  Bank  of  Missouri,  46  Mo., 
140;  Kelsey  v.  National  Bank  of  Crawford,  69  Pa.  St.,  426;  Atlantic 
Nat.  Bank  v.  Harris,  118  Mass.,  147.)  A  National  bank,  organized  as 
the  successor  of  a  State  bank,  may  take  and  hold  the  assets  of  the 
bank  whose  place  it  takes,  though  there  was  not  in  form  a  conversion 
from  a  State  to  a  National  corporation,  but  the  organization  of  a  new 
corporation.  (Bank  v.  Mclntyre,  40  Ohio  St.,  528.)  And  such  bank 
will  be  liable  to  the  depositors  of  the  fdrmer  bank.  (Eans  v.  Exchange 
Bank,  79  Mo.,  182.) 

Assets  of  Converting  Bank. — The  Comptroller  of  the  Currency  has 
ruled  that  a  bank  entering  the  National  system  by  conversion  will  be 
allowed  to  carry  over  to  and  include  in  its  assets  as  a  National  bank 
only  such  assets  as  are  allowed  by  the  National  Bank  Act,  excluding 
any  assets  prohibited  by  Sections  5136  and  5200,  Revised  Statutes, 
excepting  that  under  certain  circumstances  and  an  assurance  of  speedy 
liquidation  a  small  portion  of  prohibited  assets  is  sometimes  permitted 
to  be  taken  over. 

Directors,  Name,  Etc. — All  of  the  directors  of  the  State  bank  at  the 
time  of  conversion  will  continue  to  be  directors  of  the  National  bank 
until  others  are  appointed  or  elected,  though  some  of  them  may  not 
have  joined  in  the  execution  of  the  articles  of  association  and  organiza- 
tion certificate.  (Lockwood  v.  The  American  National  Bank,  9  R. 
I.,  308.)  A  State  law  authorizing  National  banks  which  have  been 
converted  from  State  banks  to  use  the  name  of  the  original  corpora- 
tion for  the  purpose  of  prosecuting  and  defending  suits  is  not  in 
conflict  with  the  National  banking  law,  and  therefore  proceedings  based 
upon  a  judgment  obtained  before  the  conversion  may  be  instituted  by 
such  association  in  its  former  corporate  name.  (Thomas  v.  Farmers* 
Bank  of  Maryland,  46  Md.,  43.)     When  a  bank  has  been  converted,  new 


47 

certificates  of  stock  are  not  necessary,  but  the  old  certificates  should 
be  stamped  to  show  the  conversion.  (Keyser  v.  Hitz,  133  U.  S.,  138.) 
For  full  information,  instructions  and  forms  see  Chapter  IV.,  Part  IV. 

§  32.  Same  Subject — State  Banks  Having  Branches. — It  shall 
be  lawful  for  any  bank  or  banking  association,  organized  under 
State  laws,  and  having  branches,  the  capital  being  joint  and  as- 
signed to  and  used  by  the  mother-bank  and  branches  in  definite 
proportions,  to  become  a  National  banking  association  in  conform- 
ity with  existing  laws,  and  to  retain  and  keep  in  operation  its 
branches,  or  such  one  or  more  of  them  as  it  may  elect  to  retain; 
the  amount  of  the  circulation  redeemable  at  the  mother-bank,  and 
each  branch  to  be  regulated  by  the  amount  of  capital  assigned  to 
and  used  by  each.     (Eev.  Stat.  U.  S.  Sec.  5155.) 

The  authority  conferred  by  this  section  appears  to  exclude  by  impli- 
cation the  right  to  establish  domestic  branches  in  any  other  case;  and 
this  has  been  the  view  uniformly  held  by  the  Comptrollers  of  the  Cur- 
rency. (See  opinion  of  Attorney  General  regarding  Lowry  Nat.  Bank, 
29  Op.  Atty.  Gen.,  81.) 

For  the  limit  of  liability  to  any  one  person  of  a  State  bank  with 
branches  converted  into  a  National  bank  see  note  to  §113,  page  105. 

§  33.  Consolidation  of  National  Banking  Associations. —  That 
any  two  or  more  National  banking  associations  located  within  the 
same  county,  city,  town,  or  village,  may  with  the  approval  of 
the  Comptroller  of  the  Currency,  consolidate  into  one  association 
under  the  charter  of  either  existing  banks,  on  such  terms  and  con- 
ditions as  may  be  lawfully  agreed  upon  by  a  majority  of  the  board 
of  directors  of  each  association  proposing  to  consolidate,  and  be 
ratified  and  confirmed  by  the  affirmative  vote  of  the  shareholders 
of  each  such  association  owning  at  least  two-thirds  of  its  capital 
stock  outstanding,  at  a  meeting  to  be  held  on  the  call  of  the 
directors  after  publishing  notice  of  the  time,  place,  and  object  of  the 
meeting  for  four  consecutive  weeks  in  some  newspaper  published 
in  the  place  where  the  said  association  is  located,  and  if  no  news- 
paper is  published  in  the  place,  then  in  a  paper  published  nearest 
thereto,  and  after  sending  such  notice  to  each  shareholder  of 
record  by  registered  mail  at  least  ten  days  prior  to  said  meeting: 


48 

Provided,  That  the  capital  stock  of  such  consolidated  association 
shall  not  be  less  than  that  required  under  existing  law  for  the 
organization  of  a  national  bank  in  the  place  in  which  it  is  located : 
And  provided  further,  That  when  such  consolidation  shall  have 
been  effected  and  approved  by  the  Comptroller  any  shareholder 
of  either  of  the  associations  so  consolidated  who  has  not  voted 
for  such  consolidation  may  give  notice  to  the  directors  of  the 
association  in  which  he  is  interested  within  twenty  days  from  the 
date  of  the  certificate  of  approval  of  the  Comptroller  that  he 
dissents  from,  the  plan  of  consolidation  as  adopted  and  approved, 
whereupon  he  shall  be  entitled  to  receive  the  value  of  the  shares 
so  held  by  him,  to  be  ascertained  by  an  appraisal  made  by  a  com- 
mittee of  three  persons,  one  to  be  selected  by  the  shareholder, 
one  by  the  directors,  and  the  third  by  the  two  so  chosen;  and  in 
case  the  value  so  fixed  shall  not  be  satisfactory  to  the  shareholder 
he  may,  within  five  days  after  being  notified  of  the  appraisal,  ap- 
peal to  the  Comptroller  of  the  Currency,  who  shall  cause  a  re- 
appraisal to  be  made,  which  shall  be  final  and  binding;  and  if 
said  reappraisal  shall  exceed  the  value  fixed  by  said  committee, 
the  bank  shall  pay  the  expenses  of  the  reappraisal;  otherwise,  the 
appellant  shall  pay  said  expenses,  and  the  value  so  ascertained 
and  determined  shall  be  deemed  to  be  a  debt  due  and  be  forth- 
with paid  to  said  shareholder  from  said  bank,  and  the  share  so 
paid  shall  be  surrendered  and  after  due  notice  sold  at  public 
auction  within  thirty  days  after  the  final  appraisement  provided 
for  in  this  Act. 

Sec.  2.  That  associations  consolidating  with  another  association 
under  the  provisions  of  this  Act  shall  not  be  required  to  deposit 
lawful  money  for  their  outstanding  circulation,  but  their  assets 
and  liabilities  shall  be  reported  by  the  association  with  which 
they  have  consolidated.  And  all  the  rights,  franchises,  and  in- 
terests of  the  said  national  bank  so  consolidated  in  and  to  every 
species  of  property,  personal  and  mixed,  and  choses  in  action 
thereto  belonging,  shall  be  deemed  to  be  transferred  to  and  vested 
in  such  national  bank  into  which  it  is  consolidated  without  any 
deed  or  other  transfer,  and  the  said  consolidated  national  bank 
shall  hold  and  enjoy  the  same  and  all  rights  of  property,  fran- 


49 

chises,  and  interests  in  the  same  manner  and  to  the  same  extent 
as  was  held  and  enjoyed  by  the  national  bank  so  consolidated 
therewith.     (Act  Nov.  7,  1918.) 

For  further  information  on  this  subject  see  Chap.  VI,  Part  IV. 

§  34.  Change  of  Name  and  Location. — That  any  National  bank- 
ing association  may  change  its  name  or  the  place  where  its  opera- 
tions of  discount  and  deposit  are  to  be  carried  on  to  any  other 
place  within  the  same  State,  not  more  than  thirty  miles  distant, 
with  the  approval  of  the  Comptroller  of  the  Currency,  by  the  vote 
of  shareholders  owning  two-thirds  of  the  stock  of  such  association. 
A  duly  authenticated  notice  of  the  vote  and  of  the  new  name  or 
location  selected  shall  be  sent  to  the  office  of  the  Comptroller  of  the 
Currency;  but  no  change  of  name  or  location  shall  be  valid  until 
the  Comptroller  shall  have  issued  his  certificate  of  approval  of 
the  same.    (Act  May  1,  1886,  Ch.  73,  Sec.  2 ;  24  Stat.  L.,  18.) 

Where  Removal  is  to  a  Larger  Place. — This  act  is  to  be  construed 
with  reference  to  the  other  provisions  of  law  governing  the  National 
banks;  and,  therefore,  where  the  removal  Is  to  be  made  td  a  larger 
place,  the  capital  stock  must  first  be  increased  to  the  amount  required 
for  banks  in  such  place.  It  Is  important  for  the  stockholders  to  bear 
this  in  mind  when  determining  the  question  of  removal.  See  First 
Nat.  Bank  v.  Murray,  212  Fed.  Rep.,  140. 

§  35.  Same  Subject — Continuance  of  Liabilities. —  That  all 
debts,  liabilities,  rights,  provisions,  and  powers  of  the  association 
under  its  old  name  shall  devolve  upon  and  inure  to  the  associa- 
tion under  its  new  name.  (Act  May  1,  1886,  Ch.  73,  Sec.  3;  24 
Stat.  L.,  19.) 

§  36.  Same  Subject. — That  nothing  in  this  act  contained  shall 
be  so  construed  as  in  any  manner  to  release  any  National  banking 
association  under  its  old  name  or  at  its  old  location  from  any 
liability  or  affect  any  action  or  proceeding  in  law  in  which  said 
association  may  be  or  become  a  party  or  interested.  (Act  May  1, 
1886,  Ch.  73,  Sec.  4;  24  Stat.  L.,  19.) 
4 


50 

§  37.  Extension  of  Corporate  Existence. — That  any  National 
banking  association  organized  under  the  Acts  of  February  twenty- 
fifth,  eighteen  hundred  and  sixty-three,  June  third,  eighteen  hun- 
dred and  sixty-four,  and  February  fourteenth,  eighteen  hundred 
and  eighty,  or  under  sections  fifty-one  hundred  and  thirty-three, 
fifty-one  hundred  and  thirty-four,  fifty-one  hundred  and  thirty-five, 
fifty-one  hundred  and  thirty-six,  and  fifty-one  hundred  and  fifty- 
four  of  the  Eevised  Statutes  of  the  United  States,  may,  at  any 
time  within  the  two  years  next  previous  to  the  date  of  the  expira- 
tion of  its  corporate  existence  under  present  law,  and  with  the 
approval  of  the  Comptroller  of  the  Currency,  to  be  granted  as 
hereinafter  provided,  extend  its  period  of  succession  by  amending 
its  articles  of  association  for  a  term  of  not  more  than  twenty  years 
from  the  expiration  of  the  period  of  succession  named  in  said  ar- 
ticles of  association,  and  shall  have  succession  for  such  extended 
period,  unless  sooner  dissolved  by  the  act  of  shareholders  owning 
two-thirds  of  its  stock,  or  unless  its  franchise  becomes  forfeited 
by  some  violation  of  law,  unless  hereafter  modified  or  repealed. 
(Act  July  12,  1882,  Ch.  290,  Sec.  1;  22  Stat.  L.,  162.) 

For  procedure  to  be  followed  and  forms,  see  Chap.  IX,  Part  IV. 

§  38.  Same  Subject — Further  Extension. — That  the  Comp- 
troller of  the  Currency  is  hereby  authorized,  in  the  manner  pro- 
vided by,  and  under  the  conditions  and  limitations  of,  the  Act  of 
July  twelfth,  eighteen  hundred  and  eighty-two,  to  extend  for  a 
further  period  of  twenty  years  the  charter  of  any  National  bank- 
ing association  extended  under  said  Act  which  shall  desire  to  con- 
tinue its  existence  after  the  expiration  of  its  charter.  (Act  April 
12,  1902,  Ch.  503;  32  Stat.  L.,  102.) 

The  regulations  of  the  Comptroller's  office  for  re-extension  of  charter 
are  the  same  as  for  original  extension.  (See  Ch.  IX,  Part  IV.)  The 
Comptroller  should  he  notified  sixty  days  before  expiration  of  old 
charter  of  intention  to  extend  or  to  close  out  the  business  of  the  bank, 
in  order  that  he  may  satisfy  himself  that  the  bank  is  solvent. 

§  39.  Same  Subject — Amendment  of  Articles  in  Case  of  Change. 
— That  such  amendment  of  said  articles  of  association  shall  be  au- 


51 

thorized  by  the  consent  in  writing  of  shareholders  owning  not  less 
than  two-thirds  of  the  capital  stock  of  the  association;  and  the 
board  of  directors  shall  cause  such  consent  to  be  certified  under  the 
seal  of  the  association,  by  its  president  or  cashier,  to  the  Comp- 
troller of  the  Currency,  accompanied  by  an  application  made  by 
the  president  or  cashier  for  the  approval  of  the  amended  articles  of 
association  by  the  Comptroller ;  and  such  amended  articles  of  asso- 
ciation shall  not  be  valid  until  the  Comptroller  shall  give  to  such 
association  a  certificate,  under  his  hand  and  seal,  that  the  associa- 
tion has  complied  with  all  the  provisions  required  to  be  complied 
with,  and  is  authorized  to  have  succession  for  the  extended  period 
named  in  the  amended  articles  of  association.  (Act  July  12,  1882, 
Ch.  290,  Sec.  2;  22  Stat.  L.,  1G2.) 

§  40.  Special  Examination  of  Extended  Bank — Certificate  of 
Comptroller. —  That  upon  the  receipt  of  the  application  and  cer- 
tificate of  the  association  provided  for  in  the  preceding  section, 
the  Comptroller  of  the  Currency  shall  cause  a  special  examination 
to  be  made,  at  the  expense  of  the  association,  to  determine  its 
condition;  and  if  after  such  examination  or  otherwise  it  appears 
to  him  that  said  association  is  in  a  satisfactory  condition,  he  shall 
grant  his  certificate  of  approval  provided  for  in  the  preceding 
section,  or  if  it  appears  that  the  condition  of  said  association  is 
not  satisfactory,  he  shall  withhold  such  certificate  of  approval. 
(Act  July  12,  1882,  Ch.  290',  Sec.  3 ;  22  Stat.  L.,  163.) 

Where  a  National  bank  continues  its  existence  and  performs  the 
functions  of  such  an  association  after  the  expiration  of  its  original 
corporate  existence  for  a  long  period  of  time,  it  will  be  presumed  to 
have  accepted  the  benefit  of  a  certificate  executed  by  the  Comptroller 
of  the  Currency  extending  its  corporate  existence.  (Clement  v.  United 
States,  149  Fed.  Rep.,  305.)  The  certificate  of  the  Comptroller  is  con- 
clusive evidence  of  a  compliance  by  the  bank  with  all  necessary  condi- 
tions precedent  to  the  extension.  (Id.)  The  Comptroller  requires  that 
the  certificate  of  approval  be  published. 

§  41.  Privileges,  Liabilities,  etc.,  of  Extended  Banks.— That  any 
association  so  extending  the  period  of  its  succession  shall  continue 
to  enjoy  all  the  rights  and  privileges  and  immunities  granted,  and 


52 

shall  continue  to  be  subject  to  all  the  duties,  liabilities  and  re- 
strictions imposed  by  the  Kevised  Statutes  of  the  United  States 
and  other  Acts  having  reference  to  National  banking  associations, 
and  it  shall  continue  to  be  in  all  respects  the  identical  association 
it  was  before  the  extension  of  its  period  of  succession.  (Act  July 
12,  1882,  Chap.  290,  Sec.  4;  22  Stat.  L.,  1G3.) 

A  bond  given  to  a  National  bank  by  the  individual  members  of  a  cor- 
poration to  secure  such  paper  as  the  bank  may  discount  for  the  cor- 
poration does  not  expire  with  the  termination  of  the  twenty  years  for 
which  the  bank  was  originally  incorporated,  and  the  obligors  are  liable 
for  discounts  made  after  the  bank  has  extended  the  period  of  its  ex- 
istence.    (National  Exchange  Bank  of  Hartford  v.  Guy,  57  Conn.,  224.) 

§  42.  Withdrawal  of  Shareholders;  Preference  in  Allotment. — 

That  when  any  National  banking  association  has  amended  its  ar- 
ticles of  association  as  provided  in  this  Act,  and  the  Comptroller 
has  granted  his  certificate  of  approval,  any  shareholder  not  assent- 
ing to  such  amendment  may  give  notice  in  writing  to  the  directors, 
within  thirty  days  from  the  date  of  the  certificate  of  approval,  of 
his  desire  to  withdraw  from  said  association,  in  which  case  he  shall 
be  entitled  to  receive  from  said  banking  association  the  value  of 
the  shares  so  held  by  him,  to  be  ascertained  by  an  appraisal  made 
by  a  committee  of  three  persons,  one  to  be  selected  by  such  share- 
holder, one  by  the  directors,  and  the  third  by  the  first  two;  and  in 
case  the  value  so  fixed  shall  not  be  satisfactory  to  any  such  share- 
holder, he  may  appeal  to  the  Comptroller  of  the  Currency,  who 
shall  cause  a  reappraisal  to  be  made,  which  shall  be  final  and  bind- 
ing; and  if  said  reappraisal  shall  exceed  the  value  fixed  by  said 
committee,  the  bank  shall  pay  the  expenses  of  said  reappraisal,  and 
otherwise  the  appellant  shall  pay  said  expenses ;  and  the  value  so 
ascertained  and  determined  shall  be  deemed  to  be  a  debt  due,  and 
be  forthwith  paid,  to  said  shareholder,  from  said  bank;  and  the 
shares  so  surrendered  and  appraised  shall,  after  due  notice,  be  sold 
at  public  sale,  within  thirty  days  after  the  final  appraisal  pro- 
vided in  this  section:  Provided,  That  in  the  organization  of  any 
banking  association,  intended  to  replace  any  existing  banking  asso- 
ciation, and  retaining  the  name  thereof,  the  holders  of  stock  in  the 


53 

expiring  association  shall  be  entitled  to  preference  in  the  allot- 
ment of  the  shares  of  the  new  association  in  proportion  to  the  num- 
ber of  shares  held  by  them  respectively  in  the  expiring  association. 
(Act  July  12,  1882,  Ch.  290,  Sec.  5;  22  Stat.  L.,  163.) 

From  What  Date  Notice  Effective. — The  notice  of  withdrawal  given 
within  30  days  after  the  extension  is  effective  as  of  the  date  of  the 
expiration  of  the  original  charter.  (Smith  v.  Phillips  Nat.  Bank,  111 
Me.,  297.)  And  where  a  shareholder  has  given  the  notice,  and  ap- 
pointed an  appraiser,  and  has  refused  to  accept  dividends  on  the  stock, 
he  can  not  be  held  liable  as  a  stockholder  because  of  delay  on  the  part 
of  the  bank.  (Kimball  v.  Aspey,  164  Fed.  Rep.,  830;  Aspey  v.  Whitte- 
more,  199  Mass.,  65.) 

Watveb  of  Right  to  Withdraw. — If,  after  the  extension  of  the  char- 
ter a  dividend  is  declared,  a  shareholder  who  demands  and  receives  the 
dividend  waives  the  right  to  withdraw.  (Smith  v.  Phillips  National 
Bank,  114  Me.,  297.) 

§  43.  Banks  Not  Extending — Continuance  of  Franchise  for  Pur- 
pose of  liquidation.— That  National  banking  associations  whose 
corporate  existence  has  expired,  or  shall  hereafter  expire,  and 
which  do  not  avail  themselves  of  the  provisions  of  this  Act,  shall  be 
required  to  comply  with  the  provisions  of  sections  fifty-two  hundred 
and  twenty-one  and  fifty-two  hundred  and  twenty-two  of  the  Re- 
vised  Statutes  in  the  same  manner  as  if  the  shareholders  had  voted 
to  go  into  liquidation,  as  provided  in  section  fifty-two  hundred  and 
twenty  of  the  Revised  Statutes ;  and  the  provisions  of  sections  fifty- 
two  hundred  and  twenty-four  and  fifty-two  hundred  and  twenty-five 
of  the  Revised  Statutes  shall  also  be  applicable  to  such  associa- 
tions, except  as  modified  by  this  Act;  and  the  franchise  of  such 
association  is  hereby  extended  for  the  sole  purpose  of  liquidating 
their  affairs  until  such  affairs  are  finally  closed.  (Act  July  12, 
1882,  Ch.  290,  Sec.  7;  22  Stat.  L.,  164.) 

The  Comptroller  sends  blanks  to  expiring  associations  to  enable  them 
to  give  the  notice  to  hi3  office  required  by  Section  5222,  Revised 
Statutes,  see  page  91.  Such  expiring  associations  must,  within  six 
months  from  the  date  of  expiration  of  the  charter,  deposit  lawful 
money  to  retire  their  circulation. 


CHAPTER  III. 

Officers  and  Shareholders. 

Section  44.  Eights  of  Shareholders  at  Election — Proxies. 

45.  Liability  of  Shareholders — National  Bank  Act. 

46.  Same — Provisions  of  Federal  Eeservo  Act. 

47.  Executors,  Trustees,  etc.,  not  personally  liable. 

48.  Directors — Election  of — Term  of  Office. 

49.  Qualification  of  Directors. 

50.  Oath  Required  of  Directors. 

51.  Vacancies — How  Filled. 

52.  Proceedings  Where  no  Election  held  at  appointed  time. 

53.  President. 

§  44.  Rights    of   Shareholders   at  Elections — Proxies. —  In    all 

elections  of  directors,  and  in  deciding  all  questions  at  meetings  of 
shareholders,  each  shareholder  shall  be  entitled  to  one  vote  on 
each  share  of  stock  held  by  him.  Shareholders  may  vote  by 
proxies  duly  authorized  in  writing;  but  no  officer,  clerk,  teller,  or 
book-keeper  of  such  association  shall  act  as  proxy;  and  no  share- 
holder whose  liability  is  past  due  and  unpaid  shall  be  allowed  to 
vote.     (Eev.  Stat.  U.  S.  Sec.  5144.) 

Shareholders'  Meetings. — There  is  nothing  in  the  National  Bank 
Act  regarding  notice  of  the  annual  meeting  of  shareholders  at  the 
time  specified  in  the  articles  of  association.  The  articles  of  association 
or  by-laws  of  the  bank  usually  provide  for  such  a  notice,  but  if  they 
are  silent  the  better  and  safer  course  would  be  to  give  the  usual  thirty 
days'  notice,  and  this  should  certainly  be  given  if  any  unusual  or 
extraordinary  business  is  to  be  considered,  such  as  amending  the  ar- 
ticles. Unless  provision  is  made  in  the  articles  of  association  special 
meetings  of  shareholders  should  be  called  on  thirty  days'  notice,  which 
should  state  the  business  to  be  transacted.  For  want  of  due  notice  the 
proceedings,  unless  acquiesced  in  or  ratified  by  all  shareholders,  may 

54 


55 

be   set   aside    as    invalid.     See    §52,    page    69,    for    procedure    where 
no  election  of  directors  is  made  at  the  time  appointed. 

A  majority  vote  of  all  the  stock  of  the  bank  is  necessary  to  amend 
the  articles  of  association  and  the  affirmative  vote  of  two-thirds  of  the 
entire  capital  stock  is  necessary  to  increase  or  reduce  the  capital, 
consolidate  the  bank  with  another  or  liquidate  the  association. 

When  an  act  requires  the  assent  of  the  shareholders  their  assent 
unless  unanimous  must  be  given  at  a  duly  called  meeting.  The  in- 
dividual assent  in  writing  of  a  majority  no  matter  how  large  is  not 
binding  upon  any  non-assenting  shareholder.  The  only  exception  to 
this  rule  is  in  the  case  of  the  amendment  of  the  articles  of  association 
extending  the  period  of  corporate  existence,  which  the  law  states  the 
shareholders  may  authorize  in  writing. 

The  mistake  is  frequently  made  of  supposing  that  business  requiring 
the  action  of  the  stockholders  can  be  transacted  at  a  meeting  of  the 
board  of  directors  when  the  directors  own  a  majority  of  the  stock,  or 
the  amount  of  stock  necessary  to  determine  the  actions  of  the  share- 
holders, but  every  stockholder  has  a  right  to'  be  present  and  to  express 
his  assent  or  dissent;  and  this  he  has,  of  course,  no  opportunity  of 
doing  when  the  business  is  considered  at  a  meeting  of  the  directors. 

Where  the  articles  of  association  of  a  National  bank  provide  that 
meetings  of  the  stockholders  may  be  called  by  the  board  of  directors 
or  by  any  three  stockholders,  a  meeting  called  by  the  President  and 
Cashier  is  not  lawfully  convened.  (Matthews  v.  Columbia  National 
Bank,  79  Fed.  Rep.,  558.) 

Cumulative  Voting — Voting  Trust. — The  laws  of  some  of  the  States 
authorize  stockholders  at  meetings  held  to  elect  directors  to  cumulate 
their  votes;  that  is,  if  a  stockholder  is  entitled  to  one  vote  on  each 
share  of  stock  held,  he  may  cast  his  entire  vote  for  one  candidate,  in- 
stead of  casting  an  equal  number  for  all  candidates.  But  this  method 
of  voting  is  not  authorized  by  the  National  Bank  Act.  Nor  can  the 
stockholders  enter  into  a  voting  trust  agreement.  (Bridgers  v.  First 
Nat.  Bank,  152  N.  C,  293.) 

Proxies.— The  Comptroller  has  ruled  that  a  director  is  an  officer  and 
can  not  act  as  a  proxy  at  a  shareholders'  meeting,  and  this  seems  to 
carry  out  the  spirit  of  the  law,  as  the  bank  is  under  the  control  of  the 
directors  and  they  have  in  many  cases  a  great  personal  interest  in 
the  action  of  the  meeting,  especially  where  the  meeting  is  held  for  the 
election  of  directors,  and  they  are  candidates  for  re-election.  In  all 
cases  it  is  best  for  the  proxy  to  be  a  person  in  no  way  connected  with 
the  management  of  the  bank.  (For  form  of  proxy  for  elections  of  di- 
rectors, see  page  66,   §48.) 

A  proxy,  howover,  while  it  must  be  in  writing,  need  not  be  in  any 


56 

particular  form,  nor  need  it  be  acknowledged  or  proved,  but  it  must 
be  in  such  shape  as  reasonably  to  satisfy  the  inspectors  of  election  as 
to  its  genuineness  and  validity,  and  to  this  end  the  corporate  officers 
may  Insist  upon  reasonable  evidence  of  the  regularity  and  the  genuine- 
ness of  the  proxy  before  allowing  it  to  be  voted.  The  proxy  should 
be  dated. 

When  certificates  of  proxy  are  destroyed  after  use,  parol  evidence 
is  admissible  to  prove  their  former  existence  and  sufficiency.  A  stock- 
holder who  signs  a  form  of  proxy  in  blank  and  hands  ft  over  to  an- 
other to  be  used  in  the  ordinary  way  impliedly  authorizes  that  other 
to  fill  up  the  blank  with  his  own  name.  Although  a  proxy  contains 
blanks  as  to'  the  hour  and  day  of  the  meeting,  yet  this  may  be  filled 
in  by  the  party  using  the  proxy. 

The  ordinary  proxy  being  intended  for  an  election  merely,  does  not 
enable  the  proxy  to  vote  to  increase  the  capital  stock  of  the  bank,  to 
consolidate  it  with  another  National  bank,  or  to'  place  it  in  liquidation, 
unless  the  proxy  itself  in  general  or  special  terms  gives  the  proxy 
the  power  to  vote  on  such  question.  The  proxy  can  not  vote  when  the 
owner  of  the  stock  is  present  and  votes.  A  proxy  is  always  revocable, 
even  when  by  its  terms  it  is  made  "Irrevocable,"  and  the  law  allows 
a  stockholder  to  revoke  it.  Frequently  an  attempt  is  made  to  per- 
manently unite  the  voting  power  of  several  stockholders  and  thus  con- 
trol the  corporation  by  giving  irrevocable  proxies  to  specified  persons, 
but  the  common  law  allows  a  stockholder  to  revoke  a  proxy  at  any 
time. 

"Where  Meeting  Not  Lawfully  Called. — A  proxy  can  not  bind  his 
principal  by  attending,  and  participating  in,  a  meeting  of  stockholders 
not  lawfully  called.  (Matthews  v.  Columbia  Nat.  Bank,  79  Fed.  Rep., 
558.) 

"What  Liability  Disqualifies  Shabeholdeb  to  Vote.— The  provision 
of  this  section  which  disqualifies  shareholders  "whose  liability  is  past 
due  and  unpaid"  applies  only  where  the  liability  is  for  unpaid  sub- 
scriptions for  stock,  and  was  not  intended  to  disqualify  shareholders 
otherwise  indebted  to  the  bank.  (United  States  ex  rel.  Cond.  v.  Barry, 
3G  Fed.  Rep.,  246.) 

§  45.  Individual  Liability  of  Stockholders — Provision  of  Na- 
tional Bank  Act. — The  shareholders  of  every  National  banking 
association  shall  be  held  individually  responsible,  equally  and 
ratably,  and  not  one  for  another,  for  all  contracts,  debts,  and  en- 
gagements of  such  association,  to  the  extent  of  the  amount  of  their 


57 

stock  therein,  at  the  par  value  thereof,  in  addition  to  the  amount 
invested  in  such  shares;  except  that  shareholders  of  any  banking 
association  now  existing  under  State  laws,  having  not  less  than  five 
millions  of  dollars  of  capital  actually  paid  in,  and  a  surplus  of 
twenty  per  centum  on  hand,  both  to  be  determined  by  the  Comp- 
troller of  the  Currency,  shall  be  liable  only  to  the  amount  invested 
in  their  shares;  and  such  surplus  of  twenty  per  centum  shall  be 
kept  undiminished^  and  be  in  addition  to  the  surplus  provided  for 
in  this  Title;  and  if  at  any  time  there  is  a  deficiency  in  such  sur- 
plus of  twenty  per  centum,  such  association  shall  not  pay  any 
dividends  to  its  shareholders  until  the  deficiency  is  made  good; 
and  in  case  of  such  deficiency,  the  Comptroller  of  the  Currency 
may  compel  the  association  to  close  its  business  and  wind  up  its 
affairs  under  the  provisions  of  chapter  four  of  this  Title.  (Rev. 
Stat.  IT.  S.  Sec.  5151.) 

§  46.  Same — Provision  of  Federal  Reserve  Act.— The  stockhold- 
ers of  every  National  banking  association  shall  be  held  indi- 
vidually responsible  for  all  contracts,  debts,  and  engagements  of 
6uch  association,  each  to  the  amount  of  his  stock  therein,  at  the 
par  value  thereof  in  addition  to  the  amount  invested  in  such  stock. 
'The  stockholders  in  any  National  banking  association  who  shall 
have  transferred  their  shares  or  registered  the  transfer  thereof 
within  sixty  days  next  before  the  date  of  the  failure  of  such  asso- 
ciation to  meet  its  obligations,  or  with  knowledge  of  such  impend- 
ing failure,  shall  be  liable  to  the  same  extent  as  if  they  had  made 
no  such  transfer,  to  the  extent  that  the  subsequent  transferee  fails 
to  meet  such  liability ;  but  this  provision  shall  not  be  construed  to 
affect  in  any  way  any  recourse  which  such  shareholders  might  other- 
wise have  against  those  in  whose  names  such  shares  are  registered 
at  the  time  of  such  failure.  (Sec.  23,  Act  Dec.  23,  1913;  38 
Stat.  L.,  273.) 

This  section  evidently  repeals  so  much  of  Sec.  5151  U.  S.  R.  S.  (Sec. 
45  next  preceding)  as  Is  Inconsistent  with  its  provisions.  Under  the 
old  law  shareholders  were  "responsible,  equally  and  ratably  f,nd  not 
one  for  another"  and  the  solvent  shareholders  could  not  he  required 
to  contribute  more  than  their  proportion  of  the  deficiency.    The  amount 


58 

which  each  shareholder  was  liable  to  contribute  bore  the  same  pro- 
portion to  the  total  deficit  as  his  own  stock  bore  to'  the  whole  amount 
of  capital  stock.  (United  States  v.  Knox,  102  U.  S.,  422.)  Under  the 
new  law  solvent  shareholders  can  be  required  to  contribute  the  portion 
that  is  not  paid  by  insolvent  shareholders  up  to  the  full  par  value 
of  their  stock  and  may  be  assessed  100  per  cent,  if  necessary  to  pay 
the  debts  of  the  bank. 

The  enactment  of  the  new  law  in  this  unsatisfactory  form,  without 
making  it  more  specific  as  to  applicability  and  without  repealing  the 
old  law  will  undoubtedly  give  rise  to  much  litigation.  Does  it  apply 
to  stock  bought  before  its  enactment?  Does  it  apply  to  debts  incurred 
or  deficits  created  prior  to  its  passage?  The  courts  will  have  to  deter- 
mine. 

The  cases  cited  in  the  following  notes  construe  the  old  law  but  the 
principles  stated  therein  apply  equally  well  to  the  new  statute. 

Fob  What  Liabilities  of  the  Bank  Shareholders  are  Responsible. 
— The  liability  is  not  contractual,  but  exists  by  force  of  the  statute. 
(Christopher  v.  Norvell,  201  U.  S.,  21G;  First  National  Bank  of  Con- 
cord v.  Hawkins,  174  U.  S.,  372.)  It  is  restricted  to  such  contracts, 
debts,  and  engagements  of  the  bank  as  have  been  duly  contracted  in 
the  ordinary  course  of  business.  (Richmond  v.  Irons,  121  U.  S.,  27; 
Schrader  v.  Manufacturers'  National  Bank,  133  U.  S.,  67.)  The  liability 
of  the  stockholders,  therefore,  can  not  be  enforced  to  pay  the  claims 
of  creditors  on  new  contracts  made  after  the  bank  has  been  placed  in 
voluntary  liquidation.   (Id.) 

Extent  of  Liabilities. — The  liability  o'f  the  shareholder  is  for  in- 
terest on  the  debts  of  the  bank  as  well  as  for  the  principal  thereof. 
(Richmond  v.  Irons,  121  U.  S„  27.)  The  assessment  itself  bears  in- 
terest from  the  date  of  the  order.     (Casey  v.  Galli,  94  U.  S.,  673.) 

Deceased  Stockholders. — This  liability  survives  against  the  repre- 
sentatives of  a  deceased  shareholder,  and  adheres  to  his  estate  after 
his  death,  though  he  dies  before  the  insolvency  of  the  bank  occurs. 
(Richmond  v.  Irons,  121  U.  S.,  27;  Davis  v.  Weed,  44  Conn.,  569; 
Wickham  v.  Hull,  60  Fed.  Rep.,  326.)  And  the  fact  that  the  title  to 
the  stock  of  a  deceased  shareholder  vests  in  his  administrator  does 
not  relieve  the  estate  from  the  burden  of  an  assessment.  (Davis  v. 
Weed,  supra.)  Nor  will  the  fact  that  the  administration  is  complete, 
and  all  the  assets  have  been  distributed,  defeat  an  action  brought  to 
recover  the  assessment.     (Id.) 

Married  Women. — When  the  law  of  the  State  where  the  contract  is 
made  permits  married  women  to  become  owners  of  stock,  they  will  be 


59 

subject  to  all  the  liabilities  of  stockholders.  (Bundy  v.  Cocke,  128  U. 
S.,  185;  Keyser  v.  Hitz,  133  U.  S.,  438;  In  Re  National  Bank  of  St.  Al- 
bans, 49  Fed.  Rep.,  120;  Anderson  v.  Line,  14  Fed.  Rep.,  405.)  If  a 
married  woman  is  by  the  State  law  capable  of  holding  stock  in  a 
National  bank  in  her  own  right,  she  is  liable  thereon  under  this  sec- 
tion, though  the  law  of  the  State  does  not  authorize  married  women 
to  bind  themselves  by  contract,  for  the  law  annexes  her  liability  of  its 
own  force,  and  no  capacity  to  act  on  her  part  is  required.  (Christopher 
v.  Norvell,  201  U.  S.,  216;  Witters  v.  Sowles,  35  Fed.  Rep.,  640,  and  38 
Fed.  Rep.,  700;  Robinson  v.  Turrentine,  59  Fed.  Rep.,  554.) 

Assignment  fob  Creditors — Defrauding  Creditors. — The  fact  that 
one  is  a  stockholder  and  director  in  an  insolvent  National  bank,  and 
individually  liable  for  the  debts  of  the  bank  to  the  amount  of  his 
stock,  will  not  operate  so  as  to  prevent  him  from  making  an  otherwise 
lawful  disposition  of  his  property  for  the  benefit  of  his  creditors. 
(Peters  v.  Bain,  133  U.  S.,  670.)  Where  a  stockholder  in  a  National 
bank  makes  a  general  assignment  after  the  bank  has  become  insolvent, 
his  estate  in  the  hands  of  the  assignee  becomes  liable  for  an  assess- 
ment upon  such  stock.     (Graham  v.  Piatt,  28  Colorado,  421.) 

Sufficiency  of  Transfer. — A  person  whose  name  is  put  upon  the 
stock-books  without  his  knowledge  or  consent  can  not  be  held  liable 
as  a  stockholder;  but  where  the  transferee  is  a  director  concerned  in 
the  management  of  the  bank  he  is  presumed  to  have  knowledge  of  the 
fact  that  the  stock  stands  in  his  name,  and  if  he  does  no't  repudiate 
the  transfer,  he  is  liable  as  the  holder.  (Brown  v.  Finn,  142  U.  S.,  56.) 
And  where  one  endorses  a  check  payable  to  his  order,  which  discloses 
upon  its  face  that  it  is  for  dividends  on  stock  standing  in  his  name 
on  the  books  of  the  bank,  he  is  estopped  to  deny  that  he  is  the  owner 
of  the  stock  upon  which  the  dividends  are  declared.  (Keyser  v.  Hitz, 
133  U.  S.,  138).  Where  certificates  of  stock  are  made  out  to  the  holder 
as  the  absolute  owner  thereof,  and  he  so  appears  on  the  books  of  the 
bank,  he  will  not  be  permitted  to  show  in  an  action  against  him  to 
recover  an  assessment  on  the  stock  that  he  held  the  same  as  trustee. 
(Lewis  v.  Levitz,  74  Fed.  Rep.,  381.) 

Subscribers  to  New  Stock. — A  stockholder  who  elects  to  subscribe 
for  shares  of  an  increase  and  actually  pays  for  the  same,  and  is  regis- 
tered as  holding  the  additional  shares  on  the  books  of  the  bank,  thereby 
becomes  a  shareholder,  and  his  failure  to  call  for  his  certificate  of 
stock  makes  no  difference  in  his  liability  as  such.  (Thayer  v.  Butler, 
141  U.  S.,  234.)  But  the  fact  that  the  subscriber  for  new  shares 
(which  were  never  issued)    received  a  dividend  on  old  shares  trans- 


60 

ferred  to  him  without  his  knowledge  in  place  of  new  shares,  does  not 
estop  him  from  denying  his  liability  as  a  shareholder,  where  such 
dividend  was  received  in  the  belief  that  it  was  paid  to  him  by  virtue 
of  his  subscription  to  the  new  stock.  (Stephens  v.  Follett,  43  Fed. 
Rep.,  842.)  But  the  subscribers  may  be  estopped  to  dispute  the  legality 
of  increase  by  accepting  certificates  for  the  stock,  receiving  dividends, 
and  giving  proxies  to  vote  upo*n  the  stock.  (Tillinghast  v.  Bailey,  86 
Fed.  Rep.,  46;  Latimer  v.  Burd,  76  Fed.  Rep.,  536.)  And  the  certificate 
of  the  Comptroller  of  the  Currency  authorizing  the  increase  of  the 
capital  stock  of  a  National  bank  is  conclusive  upon  the  subscribers  to 
such  new  stock  when  sued  for  an  assessment  laid  upon  the  same.  (Id.) 
(See  also  McFarlin  v.  First  Nat.  Bank,  68  Fed.  Rep.,  868.) 

Liability  of  Pledgee. — A  person  who  holds  stock  merely  as  collateral 
security  is  liable  as  the  owner  of  the  stock,  if  he  appears  upon  the 
books  of  the  bank  as  such.  (National  Bank  v.  Case,  99  U.  S.,  628; 
Moore  v.  Jones,  3  Woods,  53;  Hale  v.  Walker,  31  Iowa,  344;  Wheelock  v. 
Kost,  77  111.,  296;  but  see  Magruder  v.  Colston,  44  Md.,  349.)  But  a 
pledgee,  acting  in  good  faith,  and  without  any  fraudulent  intention, 
has  the  perfect  right  to  shun  such  liability,  and  may  have  the  control 
of  the  stock  for  the  purposes  of  security  without  being  made  liable 
as  a  registered  shareholder.  (Anderson  v.  Philadelphia  Warehouse 
Company,  111  U.  S.,  479.)  In  Beall  v.  Essex  Savings  Bank  (67  Fed. 
Rep.,  816),  it  was  held  by  the  United  States  Circuit  Court  of  Appeals, 
that  where  the  stock  is  transferred  as  collateral  security,  and  the  fact 
that  it  is  held  only  as  such  security  appears  upon  the  transfer  book 
of  the  bank,  the  person  by  whom  it  is  so  held  will  not  be  liable  to  an 
assessment  upon  the  stock  in  case  of  the  failure  of  the  bank.  And,  in 
Pauly  v.  State  Loan  and  Trust  Company  (165  U.  S.,  606),  it  was  held 
by  the  Supreme  Court  of  the  United  States  that  one  to  whom  stock  of 
a  National  bank  is  transferred  upon  the  books  of  the  bank  "as  pledgee" 
is  not  liable  as  a  stockholder. 

And,  of  course,  a  pledgee  who  does  not  appear  by  the  books  of  the 
bank  or  otherwise  to  be  the  owner  is  not  liable  for  an  assessment  upon 
the  shares  on  the  insolvency  of  the  bank.  (Welles  v.  Larrabee  et  ah, 
36  Fed.  Rep.,  866;  Robinson  v.  Southern  National  Bank,  94  Fed.  Rep., 
964.)  If  the  holder  in  fact  holds  the  stock  merely  as  collateral  se- 
curity, he  may  list  the  shares  in  his  own  name  as  pledgee,  or  in  the 
name  of  another  and  irresponsible  party,  even  though  this  be  done 
for  the  purpose  of  avoiding  liability.  (Rankin  v.  Fidelity  Insurance, 
etc.,  189  U.  S.,  242;  National  Park  Bank  of  N.  Y.  v.  Harmon,  214  Fed. 
Rep.,  891;  Higgins  v.  Fidelity  Insurance,  T.  and  S.  Dep.  Co.,  108  Fed. 
Rep.,  475.)  When  proved  or  admitted  that  the  person  in  whose  name 
the  stock  stands  is  a  mere  pledgee,  the  burden  is  upon  the  receiver 


61 

to  show  that  he  knowingly  permitted  it  to  stand  in  his  name  on  the 
books  of  the  bank.  (Tourtelot  v.  Stoltenben,  101  Fed.  Rep.,  362.)  If 
the  person  who  takes  stock  as  pledgee  uses  the  same  so  as  to  vest  the 
title  in  himself,  he  is  liable  as  a  stockholder.  (Ohio  Valley  Nat.  Bank 
v.  Hulitt,  204  U.  S.,  162.) 

Purchase  in  Name  of  Infant. — One  who  buys  stock  of  a  National 
bank  in  the  name  of  an  Infant  or  transfers  stock  to  an  infant  will  be 
liable  for  an  assessment,  since  the  infant  is  incapable  of  binding  him- 
self as  a  stockholder.  (Foster  v.  Chase,  75  Fed.  Rep.,  797;  Aldrich  v. 
Bingham,  131  Fed.  Rep.,  363.)  And  the  ratification  by  the  infant  of 
such  purchase  after  he  becomes  of  age  will  not  affect  such  liability. 
(Foster  v.  Wilson,  75  Fed.  Rep.,  797;  but  see  Fowler  v.  Gowing,  152 
Fed.  Rep.,  801.) 

Liability  is  fob  Benefit  of  All  Cbeditobs. — The  liability  of  the 
stockholders  can  be  enforced  only  in  favor  of  all  the  creditors.  If, 
therefore,  a  stockholder  gives  any  security  for  his  liability,  it  must 
be  for  the  benefit  of  all  the  creditors  alike.  Where  a  stockholder,  after 
the  failure  of  a  bank,  gave  a  mortgage  for  the  purpose  of  securing  a 
single  depositor,  such  mortgage  was  held  void  as  against  a  judgment 
obtained  in  an  action  against  such  stockholder  to  enforce  his  indi- 
vidual liability.     (Catch  v.  Fitch,  34  Fed.  Rep.,  566.) 

Rescinding  Purchase— Fbaud  of  Bank.— A  stockholder  who  has  been 
induced  by  fraudulent  representations  to  subscribe  for  sto'ck  in  a  Na- 
tional bank  will  not  necessarily  be  precluded  from  repudiating  such 
subscription  by  reason  of  the  insolvency  of  the  bank,  if  he  has  exer- 
cised due  diligence  in  discovering  the  fraud,  and  has  acted  promptly 
after  such  discovery.  (Newton  Nat.  Bank  v.  Newbegin,  74  Fed.  Rep., 
135;  Salter  v.  Williams,  244  Fed.  Rep.,  126.)  An  intending  purchaser 
of  bank  stock  is  entitled  to  rely  upon  a  statement  of  its  president  as 
to  the  bank's  condition  without  inquiring  further.  (Merrill  v.  Florida 
Land  &  Improvement  Co.,  CO  Fed.  Rep.,  17.)  The  receipt  by  a  bank 
of  the  proceeds  of  a  fraudulent  sale  of  stock  belonging  to  it,  and  the 
subsequent  appointment  of  a  receiver,  gives  its  creditors  no  such 
right  in  the  proceeds  as  will  prevent  the  purchasers  from  rescinding 
the  sale  and  requiring  restitution.     (Id.) 

Estoppel. — A  shareholder  against  whom  suit  is  brought  to  recover 
the  assessment  made  upon  him  by  the  Comptroller  will  not  be  per- 
mitted to  deny  the  existence  of  the  association,  or  that  it  was  legally 
incorporated.  (Casey  v.  Galli,  94  U.  S.,  673;  Wheelock  v.  Kost,  77  111., 
296.) 


62 

Procedure. — The  creditors  of  an  insolvent  National  bank  must  seek 
their  remedy  through  the  Comptroller,  in  the  mode  prescribed  by  the 
statute;  they  can  not  proceed  directly  in  their  own  names  against 
stockholders.  It  is  the  duty  of  the  Comptroller  of  the  Currency  to 
decide  when  proceedings  are  necessary  against  the  stockholders  of  a 
National  bank  to  enforce  their  personal  liability,  and  to  what  extent 
such  liability  shall  be  enforced;  and  in  an  action  by  a  receiver  to 
enforce  such  liability,  such  prior  determination  of  the  Comptroller 
must  be  distinctly  averred  and  proved.  But  it  is  not  essential  to  aver 
and  prove  that  the  assessment  was  necessary,  for  the  decision  of  th9 
Comptroller  on  this  point  is  conclusive.  Kennedy  v.  Gibson,  8  Wall, 
498;  Casey  v.  Galli,  94  U.  S.,  673.)  Nor  is  it  necessary  to  allege  that 
the  Comptroller  had  determined  that  the  assessment  was  necessary; 
it  is  sufficient  to  allege  that  he  made  the  assessment.  (O'Connor  v. 
Whithorby,  111  Cal.,  523.) 

Demand  Not  Necessary. — Demand  of,  or  notice  to,  stockholders  by 
the  Comptroller  of  the  Currency  or  receiver,  is  not  a  prerequisite  to 
the  maintenance  of  a  suit  to  enforce  the  stockholders'  statutory  lia- 
bility. (Rankin  v.  Miller,  207  Fed.  Rep.,  602;  Weitzel  v.  Brown,  224 
Mass.,  190.) 

Decision  of  Comptroller  Conclusive. — The  decision  of  the  Comp- 
troller of  the  Currency  that  it  is  necessary  to  enforce  the  statutory 
liability  of  the  stockholders  is  conclusive,  and  may  not  be  questioned 
by  a  stockholder  in  an  action  to  enforce  his  liability.  (Rankin  v. 
Miller,  207  Fed.  Rep.,  602;  DeWeese  v.  Smith,  106  Fed.  Rep.,  438; 
Aldrich  v.  Campbell,  97  Fed.  Rep.,  663;  Rankin  v.  Ware,  88  Kan.,  23.) 
And  so  as  to  his  decision  that  a  second  or  further  assessment  is  neces- 
sary.    (Rankin  v.  Miller,  supra). 

Form  of  Action. — When  the  full  personal  liability  of  shareholders  is 
to  be  enforced  the  action  must  be  at  law.  (Kennedy  v.  Gibson,  8  Wall, 
498;  Casey  v.  Galli,  94  U.  S.,  673.)  When  the  assessment  is  not  for 
the  full  value  of  the  shares,  the  suit  may  be  in  equity.  (Kennedy 
v.  Gibson,  8  Wall,  498.)  And  where  questions  are  involved  which  are 
common  to  a  number  of  stockholders  they  may  be  joined  as  defendants. 
(Bailey  v.  Tillinghast,  99  Fed.  Rep.,  801.) 

When  Right  of  Action  Accrues — Statute  of  Limitations. — The 
liability  of  stockholders  of  National  banks  is  conditional,  and  the 
right  to  sue  does  not  obtain  until  the  Comptroller  of  the  Currency  has 
acted;  his  order  is  the  basis  of  the  suit,  and  the  statute  of  limitations 
does  not  commence  to  run  until  assessment  is  made.     (McClain  v.  Rankin, 


63 

197  U.  S.,  154;  Aldrich  V.  Yates,  05  Fed.  Rep.,  78;  McDonald  v.  Thomp- 
son, 184  U.  S.,  71;  Deweese  v.  Smith,  106  Fed.  Rep.,  438.)  The  State 
statute  of  limitations  apply  to  actions  to  enforce  assessments.  (Mc- 
Clain  v.  Rankin,  197  U.  S.,  154;  Butler  v.  Pole,  44  Fed.  Rep.,  586; 
Thompson  v.  German  Insurance  Company,  76  Fed.  Rep.,  892.)  The 
statute  begins  to  run  as  soon  as  the  assessment  is  made.  Laches  on 
the  part  of  the  Comptroller  of  the  Currency  in  failing  to  collect  an 
earlier  assessment  and  in  undertaking  the  collection  of  the  one  sued 
on  is  not  a  defense,  since  these  matters  are  committed  exclusively  to 
his  judgment  and  his  action  must  be  treated  as  seasonable  and  regular. 
(Rankin  v.  Miller,  207  Fed.  Rep.,  C02.) 

Set-off. — A  stockholder  of  an  insolvent  National  bank,  who  happens 
also  to  be  one  of  its  creditors,  can  not  cancel  or  diminish  the  assess- 
ment by  offsetting  his  individual  claim  against  it.  (Hobart,  Receiver, 
etc.,  v.  Gould,  8  Fed.  Rep.,  57:  Sowles  v.  Witters,  39  Fed.  Rep.,  403;  but 
see  Welles  v.  Stout,  38  Fed.  Rep.,  807).  The  indebtedness  on  the  assess- 
ment of  a  stockholder  who  is  insolvent  may  be  set  off  against  a  divi- 
dend, payable  out  of  the  assets  of  the  bank,  on  a  balance  due  him  on 
his  deposit  account  with  the  bank  at  the  time  of  its  failure.  (King  v. 
Armstrong,  50  Ohio  St.,  222.) 

Agent  May  Not  Enforce. — An  agent  chosen  by  stockholders  to  take 
charge  of  the  business  of  a  National  bank  in  liquidation  can  not  en- 
force the  individual  liability  of  the  stockholders,  after  all  the  debts 
have  been  paid.  (Church  v.  Ayer,  80  Fed.  Rep.,  543;  Williamson  v. 
American  Bank,  109  Fed.  Rep.,  36.) 

Claim  Not  Entitled  to  Preference. — The  individual  liability  of  a 
stockholder  in  an  insolvent  National  bank  is  not  a  preferred  claim 
against  his  estate,  and  is  not  entitled  to  priority  of  payment  even 
though  the  estate  is  insolvent.  (In  Re  Beard's  Estate,  7  Wyoming, 
104.) 

Books  of  the  Bank  as  Evidence  in  Suit  to  Recover  Assessment. — 
The  books  of  a  National  bank  are,  among  the  shareholders,  public  rec- 
ords and  evidence  of  what  they  show,  and  are  admissible  against  a 
shareholder  in  an  action  brought  against  him  by  the  Receiver  to  re- 
cover an  assessment  upon  his  stock.  (Brown  v.  Ellis,  103  Fed.  Rep., 
834.) 

Successive  Assessments. — The  Comptroller  of  the  Currency  has 
power  to  levy  successive  assessments  upon  the  stockholders  in  an  in- 
solvent National  bank  and  his  power  is  not  exhausted  by  one  assess- 
ment.    (Studebaker  v.  Perry,  184  U.  S.,  252;   Aldrich  v.  Campbell,  97 


64 

Fed.  Rep.,  663;  Studebaker  v.  Perry,  102  Fed.  Rep.,  947.)  And  a 
judgment  In  favor  of  the  Receiver  for  the  recovery  of  an  assessment 
does  not  estop  him  from  maintaining  a  second  action  against  the 
same  shareholder  for  another  assessment  which  had  not  been  made 
or  was  not  due  when  the  first  action  was  commenced.  (Deweese  v. 
Smith,  106  Fed.  Rep.,  438.)  The  Comptroller  of  the  Currency  has 
discretionary  power  to  withdraw  an  assessment  on  shareholders  before 
it  is  paid  or  when  partly  paid.  (Korbley  v.  Springfield  Inst,  for  Sav- 
ings, 245  U.  S.,  330.) 

Pckciiase  Procured  by  Fraudulent  Representations  of  Officebs. — 
In  an  action  at  law  by  the  Receiver  of  an  insolvent  National  bank  to 
enforce  the  individual  liability  of  a  shareholder,  the  latter  can  not 
set  up  as  a  defense  that  he  was  induced  to  purchase  the  stock  of  the 
bank  by  the  fraudulent  representations  of  its  officers.  (Lantry  v. 
Wallace,  182  U.  S„  536;   Scott  v.  Latimer,  89  Fed.  Rep.,  843.) 

Where  Bank  Has  Gone  Into  Liquidation. — Where  the  bank  has  gone 
into  voluntary  liquidation,  the  only  authorized  procedure  for  the  en- 
forcement of  the  individual  liability  of  its  stockholders  is  by  a  suit  in 
equity  in  the  nature  of  a  creditor's  suit  brought  on  behalf  of  all 
creditors  in  a  court  for  the  district  in  which  the  bank  is  located,  in 
which  the  necessity  and  extent  of  the  ratable  enforcement  of  the  stock- 
holders' liability  shall  be  determined.  (Williamson  v.  American  Bank, 
115  Fed.  Rep.,  793.)  Such  suit  sho"uld  be  brought  against  the  bank  and 
all  its  stockholders,  and,  in  case  ancillary  proceedings  should  be  neces- 
sary for  the  collection  from  non-resident  stockholders  of  their  ratable 
proportion  of  the  amount  necessary  to  pay  creditors,  such  suits  should 
be  authorized  by  the  court  of  original  jurisdiction,  and  brought  by  a 
Receiver  or  other  person  appointed  by  such  court.   (Id.) 

§  47.  Executors,  Trustees,  etc.,  Not  Personally  Liable. —  Persons 
holding  stock  as  executors,  administrators,  guardians,  or  trustees, 
shall  not  be  personally  subject  to  any  liabilities  as  stockholders; 
but  the  estates  and  funds  in  their  hands  shall  be  liable  in  like 
manner  and  to  the  same  extent  as  the  testator,  intestate,  ward,  or 
person  interested  in  such  trust-funds  would  be,  if  living  and  com- 
petent to  act  and  hold  the  stock  in  his  own  name.  (Rev.  Stat. 
TJ.  S.  Sec.  5152.) 

Application  of  Section. — This  section  is  of  general  application  and 
is  not  limited  to  trustees  appointed  such  by  will  or  by  order  of  some 
court  or  judge.     (Lucas  v.  Coe,  86  Fed.  Rep.,  972.)     The  fact  that  the 


<65 

trust  estate  consists  entirely  of  stock  in  the  failed  bank,  and  that  the 
failure  of  the  bank  wipes  out  the  value  of  the  trust  estate  does  not 
impose  any  liability  upon  the  trustee  individually.  (Fowler  v.  Gowing, 
152  Fed.  Rep.,  801;  165  Fed.  Rep.,  891.) 

An  executor  continues  to  be  liable  as  such  for  an  assessment  upon 
National  bank  stock  left  by  his  testator  until  he  has  transferred  the 
personal  property  belonging  to  the  estate.  (Baker  v.  Beach,  85  Fed. 
Rep.,  836.) 

Evidence  of  Ownership. — The  fact  that  the  stock  is  held  in  a  repre- 
sentative capacity  must  be  noted  on  the  stock-book  of  the  bank;  if 
a  person  appears  there  as  absolute  owner  of  the  stock  he  will  not  be 
permitted  to  deny  that  he  is  such.  (Davis  v.  Essex  Baptist  Society, 
44  Conn.,  569;  Lewis  v.  Switz,  74  Fed.  Rep.,  1.)  But  see  McMahon  v. 
Macy  (51  N.  Y.,  155).  And  if  a  person  appears  on  the  stock-book  as 
"trustee"  he  is  not  personally  liable.  (Welles  v.  Larrabee,  36  Fed. 
Rep.,  866.) 

§  48.  Directors — Election  of — Term  of  Office. — The  affairs 
of  each  association  shall  be  managed  by  not  less  than  five  directors, 
who  shall  be  elected  by  the  shareholders  at  a  meeting  to  be  held 
at  any  time  before  the  association  is  authorized  by  the  Comptroller 
of  the  Currency  to  commence  the  business  of  banking;  and  after- 
ward at  meetings  to  be  held  on  such  day  in  January  of  each  year 
as  is  specified  therefor  in  the  articles  of  association.  The  directors 
shall  hold  office  for  one  year,  and  until  their  successors  are  elected 
and  have  qualified.     (Rev.  Stat.  IT.  S.  Sec.  5145.) 

For  restrictions  on  interlocking  directorates,  see  Section  8,  Clayton 

Anti-Trust  Act,  §305  ft. 

Annual  Meeting — Date  of — Business  at  Annual  Meetings — Repbe- 
sentation. — .The  annual  meeting  must  be  held  in  January,  but  on  any 
day  of  that  month,  although  in  the  articles  of  association  furnished  by 
the  Comptroller  the  second  Tuesday  is  named  and  commonly  adopted. 

At  the  annual  meeting  no  business  but  the  election  of  directors  can 
be  transacted  without  due  notice  having  been  given,  stating  that  other 
business  will  be  transacted;  otherwise  the  ratification  of  action  taken 
should  be  obtained  from  shareholders  not  present. 

No  provision  is  made  in  the  statute  for  any  definite  representation 
of  stock  at  annual  meetings,  and  the  Comptroller  holds  that  a  majority 
is  not  necessary  unless  provided  in  the  articles  of  association  or  by- 
laws. 

5 


GG 

Form  of  Proxy  for  Use  at  Shareholders'  Meeting  for  Election  of 

Directors. — Know  all  men  by  these  presents  that  I,  — ■ — , 

do  hereby  constitute  and  appoint attorney  and  agent  for 

me,  and  in  my  name,  place,  and  stead  to  vote  as  my  proxy  at  any  and 

all  elections  of  directors  of according  to  the  number  of 

votes  I  should  be  entitled  to  vote  if  there  personally  present. 

In  witness  whereof  I  have  hereunto  set  my  hand  this  day  of 

— i >,  one  thousand  nine  hundred  and    — 


Signed  in  presence  of — 


§  49.  Qualifications  of  Directors. — Every  director  must,  dur- 
ing his  whole  term  of  service,  be  a  citizen  of  the  United  States,  and 
at  least  three-fourths  of  the  directors  must  have  resided  in  the 
State,  Territory,  or  district  in  which  the  association  is  located, 
for  at  least  one  year  immediately  preceding  their  election,  and 
must  be  residents  therein  during  their  continuance  in  office.  Every 
director  must  own,  in  his  own  right,  at  least  ten  shares  of  the 
capital  stock  of  the  association  of  which  he  is  a  director,  unless 
the  capital  stock  of  the  bank  shall  not  exceed  twenty-five  thousand 
dollars,  in  which  case  he  must  own  in  his  own  right  at  least  five 
shares  of  such  capital  stock.  Any  director  who  ceases  to  be  the 
owner  of  the  required  number  of  shares  of  the  stock,  or  who  be- 
comes in  any  other  manner  disqualified,  shall  thereby  vacate  his 
place.  (Eev.  Stat.  II.  S.  Sec.  5146;  Act  Feb.  28,  1905,  Ch.  1163; 
33  Stat.  L.,  818.) 

Qualifications  of  Directors. — A  director  of  a  National  bank  must 
be  a  citizen  of  the  United  States,  must  own  in  his  own  right  not  less 
than  five  shares  of  the  stock  of  the  bank  when  the  capital  is  $25,000, 
and  ten  shares  in  other  cases,  and  he  must  hold  the  stock  free  from 
pledge.  In  a  newly  organized  bank  a  director  may  pay  for  his  stock 
in  partial  payments  on  the  same  terms  as  the  other  shareholders  and 
need  not  pay  sooner  in  order  to  qualify.  As  the  stock  must  be  held 
in  the  director's  own  right,  no  person  who  holds  stock  in  a  merely 
representative  capacity — as  an  executor,  administrator,  guardian,  or 
trustee — can  be  a  director.    The  number  of  shares  held  by  a  director 


67 

of  a  State  bank  converting  to  a  National  bank  may  remain  the  same 
until  the  annual  election.  Then  the  number  must  be  that  required  of  a 
National  bank,  but  the  par  value  of  the  stock  does  not  need  to  be 
changed. 

A  director  who  owns  more  than  the  required  number  of  shares  may- 
sell  or  pledge  all  of  his  stock  except  the  requisite  number  without 
becoming  disqualified.  A  person  who  is  not  a  shareholder  may  be 
elected  director  but  can  not  qualify  until  he  has  acquired  the  requisite 
number  of  shares. 

A  director  when  elected  or  within  a  reasonable  time  thereafter, 
must  take  the  oath  required.  On  failure  to  do  so,  it  would  appear 
that  a  vacancy  may  be  declared  and  a  new  director  elected. 

At  least  three-fourths  of  the  directors  must  have  resided  in  the 
State,  Territory  or  district  where  the  bank  is  located  for  one  year 
immediately  preceding  their  election,  and  continue  residents  while 
directors.  It  is  therefore  necessary  that  in  a  board  of  five,  four  must 
be  residents.     In  a  board  of  seven,  six,  etc. 

An  unmarried  woman,  whether  a  widow  or  spinster,  can  be  a  di- 
rector; and  so  may  a  married  woman  in  States  where  the  laws  permit 
her  to  assume  all  the  obligations  of  a  stockholder. 

§  50.  Oath  Required  of  Directors. — Each  director,  when  ap- 
pointed or  elected,  shall  take  an  oath  that  he  will,  so  far  as  the 
duty  devolves  on  him,  diligently  and  honestly  administer  the 
affairs  of  such  association,  and  will  not  knowingly  violate,  or 
willingly  permit  to  be  violated,  any  of  the  provisions  of  this  Title, 
and  that  he  is  the  owner  in  good  faith,  and  in  his  own  right,  of 
the  number  of  shares  of  stock  required  by  this  Title,  subscribed  by 
him  or  standing  in  his  name  on  the  books  of  the  association,  and 
that  the  same  is  not  hypothecated,  or  in  any  way  pledged,  as 
security  for  any  loan  or  debt.  Such  oath,  subscribed  by  the  direc- 
tor making  it,  and  certified  by  the  officer  before  whom  it  is  taken, 
shall  be  immediately  transmitted  to  the  Comptroller  of  the  Cur- 
rency, and  shall  be  filed  and  preserved  in  his  office.  (Rev.  Stat. 
U.  S.  Sec.  5147.) 

For  liability  of  directors  for  violation  of  act,  see  §163,  page  161. 

Oath  of  Directors. — The  law  as  regards  directors'  oaths  is  fatally 
defective,  failing  to  provide  before  what  officer  to  be  taken.  That  an 
oath  may  have  efficacy,  especially  in  case  an  indictment  for  perjury 


68 

is  to  be  sustained  thereon,  it  is  requisite  that  the  oath  shall  have  been 
prescribed  by  law,  and  taken  before  an  officer  duly  authorized  to  ad- 
minister it.  The  act  of  Feb.  2G,  1881,  which  authorizes  an  oath 
to  be  taken  before  a  notary  public,  applies  only  to  the  oath  to 
the  report  of  condition  of  bank.  As  regards  the  other  oaths  pre- 
scribed by  the  National  banking  law,  there  does  not  appear  to  be  any 
officer  competent  to  administer  them.  (United  States  v.  Curtis,  107 
U.  S.,  671.)  The  Comptroller,  however,  requires  them  to  be  taken. 
For  forms  of  oaths  of  directors  see  Chapter  I,  Part  IV. 

Directors  Can  Act  Only  as  a  Board. — The  election  of  a  person  as  a 
director  does  not  constitute  him  an  agent  of  the  corporation  with  au- 
thority to  act  separately  and  independently  of  his  fellow-members.  It 
is  the  board,  duly  convened  and  acting  as  a  unit,  that  is  made  the 
representative  of  the  bank.  (National  Bank  v.  Drake,  35  Kan.,  564.) 
Frequently,  it  is  true,  a  director  does  have  authority  to  bind  the  bank 
when  acting  separately  and  apart  from  the  others;  but  he  must  have 
been  authorized  by  the  Board,  either  expressly  or  impliedly,  to  act  as 
the  agent  of  the  bank. 

"What  Constitutes  a  Board. — A  quorum  generally  consists  of  a  ma- 
jority of  the  whole  board.  A  provision  to  this  effect  is  usually  con- 
tained in  the  articles  of  association  (see  form  of  articles  Ch.  I,  Part  IV, 
though  this  would  be  the  rule  in  the  absence  of  any  provision  what- 
ever on  the  subject. 

Where  a  majority  is  required  to  constitute  a  quorum,  this  means  a 
majority  of  a  full  board,  and  not  merely  a  majority  of  those  who 
may  be  members  at  the  time.  Thus,  should  there  be  a  vacancy  in  a 
board  consisting  of  ten  members,  six  would  still  be  necessary  to  make 
a  quorum,  though  five  would  be  a  majority  of  the  present  members. 
Sometimes  the  articles  of  association  do'  not  provide  for  any  specific 
number  of  directors,  but  provide  that  the  board  shall  consist  of  not 
less,  or  not  more,  than  a  certain  number,  or  both,  as  for  instance, 
"The  board  of  directors  shall  consist  of  not  less  than  five  and  not 
more  than  ten  stockholders."  This  leaves  it  to  the  stockholders  to 
determine  at  each  annual  election  the  number  which  shall  constitute 
a  full  board  for  the  ensuing  year.  If,  in  such  a  case,  the  stockholders 
do  not  manifest  their  intention  by  expressly  setting  it  forth  in  a  reso- 
lution, it  is  to  be  gathered  from  their  action  in  electing  a  certain 
number  of  directors,  and  it  is  to  be  supposed  that  the  number  so 
elected  was  intended  to  constitute  the  board  for  the  year;  and  the 
effect  is  the  same  as  if  they  had  expressly  provided  for  that  number 
in  the  articles  of  association  or  otherwise.  Vacancies  occurring 
through  the  year  should,  therefore,  be  filled  as  in  other  cases. 


69 

Disqualification  and  Resignation. — It  would  seem  to  be  the  proper 
construction  of  the  law  that  where  a  director  becomes  disqualified,  this 
ipso  facto  vacates  his  place  in  the  board,  and  no  removal  by  the  other 
directors  is  necessary.  The  provision  that  the  directors  are  to  hold 
office  for  one  year  does  not  require  a  director  to  serve  for  the  whole 
term  for  which  he  was  elected,  and  prohibit  him  from  resigning  dur- 
ing such  term,  but  he  may  resign  at  any  time  during  the  year.  (Briggs 
v.  Spalding,  141  U.  S.,  132.)  The  apparent  purpose  of  the  provision, 
in  regard  to  the  term  of  office,  is  to  make  it  conform  to  the  time  of 
the  new  election,  and  not  to  absolutely  require  every  director  to  serve 
the  full  term.  (Movius  v.  Lee,  30  Fed.  Rep.,  298.)  The  resignation 
of  a  director  should  be  tendered  to  the  board,  and  not  to  the  share- 
holders. As  the  president  is  the  head  of  the  board,  it  may  be  tendered 
to  him.  (Movius  v.  Lee,  30  Fed.  Rep.,  298.)  It  is  the  more  orderly 
and  proper  way  to  put  the  resignation  in  writing,  but  an  oral  resigna- 
tion tendered  to  the  president  is  sufficient.  (Briggs  v.  Spalding,  141 
U.  S.,  132.) 

§  51.  Vacancies — How  Filled. — 'Any  vacancy  in  the  board  shall 
be  filled  by  appointment  by  the  remaining  directors,  and  any  di- 
rector so  appointed  shall  hold  his  place  until  the  next  election. 
(Eev.  Stat.  U.  S.  Sec.  5148.) 

It  seems  to  be  the  proper  construction  of  this  section,  that  the  duty 
of  filling  any  vacancy  in  the  board  is  obligatory  on  the  remaining  di- 
rectors, and  is  not  merely  discretionary  with  them.  The  power  is  con- 
ferred upon  them  for  the  benefit  of  the  bank  and  its  stockholders,  and 
these  have  an  interest  in  having  the  power  exercised. 

§  52.  Proceedings  Where  No  Election  Held  at  Time  Appointed. 
— If,  from  any  cause,  an  election  of  directors  is  not  made  at  the 
time  appointed,  the  association  shall  not  for  that  cause  be  dis- 
solved, but  an  election  may  be  held  on  any  subsequent  day,  thirty 
days'  notice  thereof  in  all  cases  having  been  given  in  a  newspaper 
published  in  the  city,  town,  or  county  in  which  the  association  is 
located;  and  if  no  newspaper  is  published  in  such  city,  town,  or 
county,  snch  notice  shall  be  published  in  a  newspaper  published 
nearest  thereto.  If  the  articles  of  association  do  not  fix  the  day 
on  which  the  election  shall  be  held,  or  if  no  election  is  held  on 
the  day  fixed,  the  day  for  the  election  shall  be  designated  by  the 
board  of  directors  in  their  by-laws,  or  otherwise;  or  if  the  directors 


70 

fail  to  fix  the  day,  shareholders   representing  two-thirds  of  the 
shares  may  do  so.     (Rev.  Stat.  U.  S.  Sec.  5149.) 

When  No  Election  Held. — It  would  seem,  therefore,  that  unless  two- 
thirds  of  the  stock  were  dissatisfied  with  an  existing  board  of  directors, 
such  board,  by  neglecting  to  have  elections  held,  might  retain  office  for 
an  indefinite  period.  The  Comptroller  might,  perhaps,  require  them  to 
renew  their  oaths  each  year,  or  he  might  construe  the  law  to  be  man- 
datory as  to  annual  elections;  in  which  case  the  bank  would  have 
to  be  guided  by  the  Comptroller's  construction,  unless  it  wished  to  con- 
test the  matter  in  the  courts. 

If  a  shareholders'  meeting  is  held  by  mistake  on  the  wrong  day, 
another  meeting  must  be  called,  giving  the  regular  thirty-day  notice, 
but  if  all  shareholders  waive  notice  and  consent  to  date  fixed,  the 
Comptroller  will  not  object. 

§  53.  President. — One  of  the  directors  to  be  chosen  by  the  board 
shall  be  the  president  of  the  board.     (Eev.  Stat.  IT.  S.  Sec.  5150.) 

For  restrictions  on  commissions,  fees,  etc.,  to  bank  officers,  see  Sec- 
tion 22  of  Federal  Reserve  Act,  page  301. 

President  of  Bank. — The  term  "president  of  the  board"  is  construed 
by  the  office  of  the  Comptroller  of  the  Currency  to  mean  president  of 
the  bank. 

Ex-Officio  Powers. — The  president  o'f  the  board  of  directors  is  the 
presiding  officer  of  the  board,  but  otherwise  his  ex-officio  powers  are 
not  greater  than  those  of  any  other  director,  except  that,  as  the  head 
of  the  board,  he  may  bring  suits  in  behalf  of  the  bank,  and  in  proceed- 
ings against  the  bank  legal  process  may  be  served  upon  him  when  it 
might  not  be  proper  to  serve  it  upon  any  other  director.  But  usually 
he  is  also  the  chief  executive  officer  of  the  bank,  and  has  large  powers 
delegated  to  him  by  the  board. 

Vested  Powers. — The  president's  authority  as  chief  managing  agent 
of  the  bank  is  derived  from  the  by-laws  or  vested  in  him  by  the  board 
of  directors,  either  expressly  or  by  implication.  The  president  has  the 
power  to  employ  counsel  and  manage  the  litigation  of  a  bank,  in  the 
absence  of  any  order  of  the  board  of  directors  depriving  him  of  such 
power.  (Citizens'  Nat.  Bank  of  Kingman  v.  Berry,  53  Kan.,  696.)  And 
he  has,  by  virtue  of  his  office,  authority  to  assign  a  judgment  owned 
by  the  bank  (Guernsey  v.  Black  Diamond  Coal  and  Mining  Company, 


71 

99  Iowa,  471);  or  to  compromise  or  release  a  debt  due  to  the  bank. 
(Farmers'  Nat.  Bank  v.  Templeton,  40  S.  W.  Rep.,  412.)  He  has  no 
power  inherent  in  his  office  to  bind  the  bank  on  the  execution  of  a  note 
in  its  name;  but  power  to  do  so  may  be  conferred  on  him  by  the 
board  of  directors,  either  expressly  by  resolution  to  that  effect,  or  by 
subsequent  ratification,  or  by  acquiescence  in  transactions  of  a  similar 
nature  of  which  the  directors  have  notice.  (National  Bank  of  Con> 
merce  v.  Atkinson,  55  Fed.  Rep.,  465.)  But  it  is  within  the  scope  of 
the  implied  power  of  the  president  to  indorse  negotiable  paper  in  the 
ordinary  transaction  of  the  bank's  business,  and  a  special  authority 
for  this  purpose  need  not  be  conferred  by  the  board  of  directors. 
(United  States  National  Bank  v.  First  Nat.  Bank  of  Little  Rock,  79 
Fed.  Rep.,  296.)  See  also  Simons  v.  Fisher,  55  Fed.  Rep.,  905.  The 
directors  have  the  right  to  remove  the  president  at  any  time  even 
though  the  bank  has  never  legally  adopted  any  by-laws.  (Taylor  v. 
Hatton,  43  Barb.,  195.) 


CHAPTER  IV. 

Issue  and  Redemption  of  Circulating  Notes. 

Section  54.  Deposit  of  Bonds  with  Treasurer — Repeal  of  Require- 
ments for  Minimum1  Deposits. 

55.  Retirement  of  National  Bank  Notes — Sale  of  Bonds 

to  Reserve  Banks. 

56.  United  States  Bonds  Denned. 

57.  Exchange  of  Coupon  Bonds  Authorized. 

58.  Exchange  for  Two  Per  Cent.  Bonds  Authorized. 

59.  Basis  of  Exchange. 

60.  Issue  of  Two  Per  Cent.  Bonds  Authorized. 

61.  Two  Per  Cent.  Bonds  to  be  Issued  at  Par — How  Num- 

bered and  Paid — Interest. 

62.  Bonds  Issued  under  Panama  Canal  Act  may  be  De- 

posited. 

63.  Bonds  Issued  under  Act  of  1909  Not  Available. 

64.  Bonds  to  be  Held  as  Securit}r  for  Circulating  Notes — 

Interest. 

65.  Where  Value  of  Bonds  has  Depreciated. 

66.  Exchange  for  Other  Bonds. 

67.  Transfer  of  Bonds  to  and  by  Treasurer. 

68.  Registry  of  Bond  Transfers. 

69.  Association  to  be  Advised  of  Transfers. 

70.  Comptroller  and  Treasurer  to  Have  Access  to  Books. 

71.  Annual  Examination  of  Bonds. 

72.  Delivery  of  Circulation  to  Associations — Amount  of. 

73.  Notes  May  Equal  Capital  Stock  Paid  In. 

74.  Bank  Which  Has  Retired  Notes  may  Increase   Cir- 

culation. 

75.  Denomination  and  Limitation  of  Notes. 

76.  Printing     of     Circulating     Notes — Denominations — 

Tenor. 

72 


73 

Section  77.  Plates  and  Dies — Expenses  of  Bureau. 

78.  Charter  Number  of  Bank  to  be  Printed  on  its  Notes. 

79.  Annual  Examination  of  Plates,  Dies,  etc. 

80.  Eepeal  of  Limit  of  Circulation,  etc. 

81.  Circulating  Notes:  for  What  Keceivable. 

82.  Bank  Liable  Though  Notes  Not  Signed  or  Signatures 

Forged. 

83.  Issue  of  Other  Notes  Prohibited. 

84.  Destroying  and  Eeplacing  Mutilated  Notes. 

85.  National  Gold  Banks. 

86.  Imitation  of  National  Bank  Notes — Penalty  for. 

87.  Penalty  for  Mutilating  Notes,  etc. 

88.  Bank  to  Bedeem  Its  Notes  at  Its  Counter. 

89.  Bedemption  Fund;  Bedemption  of  Notes  at  United 

States  Treasury. 

90.  Bedemption  Fund  Covered  into  Treasury. 

91.  Betiring  Circulation. 

92.  Same  Subject. 

93.  Circulating  Notes  of  Extended  Banks — Lawful  Money 

Deposit — Expense  of  New  Plates. 

94.  Deposit  to  Bedeem  Circulation  of  Liquidating  Banks. 

95.  Beassignment  of  Bonds,  Bedemption  of  Notes,  etc.,  in 

Such  Case. 

96.  Beturn  of  Notes  of  Failed  or  Liquidating  Banks. 

97.  Destruction  of  Bedeemed  Notes  of  Liquidating  Bank. 

98.  Mode  of  Protesting  Notes. 

99.  Examination  by  Special  Agent — Forfeiture  of  Bonds. 

100.  Bank  Not  to  Do  Business  After  Protest  of  Notes. 

101.  Bedemption  of  Notes  at  Treasury. 

102.  Sale  of  Bonds — Lien  of  United  States  upon  Assets. 

103.  Sale  of  Bonds  at  Private  Sale. 

104.  Expense  of  Transporting  and  Assorting  Notes — Cost 

of  Plates. 

105.  Same  Subject. 

106.  Disposition  to  be  Made  of  Notes  Bedeemed  by  Treas- 

urer. 

107.  Cancellation  of  Notes. 


74 

Section  108.  Mode  of  Destruction. 

§  54.  Deposit  of  Bonds  with  Treasurer — Repeal  of  Require- 
ments for  Minimum  Deposit.— So  much  of  the  provisions  of  sec- 
tion fifty-one  hundred  and  fifty-nine  of  the  Revised  Statutes  of 
the  United  States,  and  section  four  of  the  Act  of  June  twentieth, 
eighteen  hundred  and  seventy-four,  and  section  eight  of  the  Act 
of  July  twelfth,  eighteen  hundred  and  eighty-two,  and  of  any 
other  provisions  of  existing  statutes  as  require  that  before  any 
National  banking  association  shall  be  authorized  to  commence 
banking  business  it  shall  transfer  and  deliver  to  the  Treasurer  of 
the  United  States  a  stated  amount  of  United  States  registered 
bonds,  and  so  much  of  those  provisions  or  of  any  other  provisions 
of  existing  statutes  as  require  any  National  banking  association 
now  or  hereafter  organized  to  maintain  a  minimum  deposit  of 
such  bonds  with  the  Treasurer  is  hereby  repealed.  (Sec.  17,  Act 
Dec.  23,  1913,  as  amended  by  Sec.  9,  Act  June  21,  1917.) 

Rigiit  of  a  National  Bank  to  Increase  the  Amotjnt  of  Its  Circu- 
lating Notes. — There  are  no  provisions  of  law  which  prohibit  a  Na- 
tional bank  from  increasing  the  amount  of  its  outstanding  circulating 
notes  merely  because  it  has  withdrawn  circulation  since  the  passage 
of  the  Federal  Reserve  Act  under  the  provisions  of  section  18  of  that 
Act.     (Opinion  of  Counsel  of  Board,  Dec.  4,  1915.) 

§  55.  Retirement  of  National  Bank  Notes — Sale  of  Bonds  to 
Reserve  Banks. — After  two  years  from  the  passage  of  this  Act,  and 
at  any  time  during  a  period  of  twenty  years  thereafter,  any  mem- 
ber bank  desiring  to  retire  the  whole  or  any  part  of  its  circulating 
notes,  may  file  with  the  Treasurer  of  the  United  States  an  appli- 
cation to  sell  for  its  account,  at  par  and  accrued  interest,  United 
States  bonds  securing  circulation  to  be  retired. 

The  Treasurer  shall,  at  the  end  of  each  quarterly  period,  fur- 
nish the  Federal  Eeserve  Board  with  a  list  of  such  applications, 
and  the  Federal  Eeserve  Board  may,  in  its  discretion,  require  the 
Federal  reserve  banks  to  purchase  such  bonds  from  the  banks  whose 
applications  have  been  filed  with  the  Treasurer  at  least  ten  days 
before  the  end  of  any  quarterly  period  at  which  the  Federal  Ee- 
serve Board  may  direct  the  purchase  to  be  made:   Provided,  That 


75 

Federal  reserve  banks  shall  not  be  permitted  to  purchase  an  amount 
to  exceed  $25,000,000  of  such  bonds  in  any  one  year,  and  which 
amount  shall  include  bonds  acquired  under  section  four*  of  this 
Act  by  the  Federal  reserve  bank. 

Provided  further,  That  the  Federal  Reserve  Board  shall  allot  to 
each  Federal  reserve  bank  such  proportion  of  such  bonds  as  the 
capital  and  surplus  of  such  bank  shall  bear  to  the  aggregate  capital 
and  surplus  of  all  the  Federal  reserve  banks. 

Upon  notice  from  the  Treasurer  of  the  amount  of  bonds  so  sold 
for  its  account,  each  member  bank  shall  duly  assign  and  transfer, 
in  writing,  such  bonds  to  the  Federal  reserve  bank  purchasing  the 
same,  and  such  Federal  reserve  bank  shall,  thereupon,  deposit  law- 
ful money  with  the  Treasurer  of  the  United  States  for  the  purchase 
price  of  such  bonds,  and  the  Treasurer  shall  pay  to  the  member 
bank  selling  such  bonds  any  balance  due  after  deducting  a  sufficient 
sum  to  redeem  its  outstanding  notes  secured  by  such  bonds,  which 
notes  shall  be  cancelled  and  permanently  retired  when  redeemed. 
(Sec.  18,  Act  Dec.  23,  1913;  38  Stat.  L.,  268.) 

Since  the  outbreak  of  the  world  war  and  the  resulting  demand  for 
circulation  of  all  kinds  the  Federal  Reserve  Board  has  not  required 
the  Federal  Reserve  Banks  to  purchase  any  bonds  under  the  provisions 
of  this  act.  As  the  present  price  of  all  bonds  with  the  circulation 
privilege  is  above  par,  and  likely  to"  remain  so,  banks  desiring  to  dis- 
pose of  such  bonds  can  sell  them  to  better  advantage  in  the  open 
market.  The  publishers  specialize  in  buying  and  selling  bonds  of  this 
character  and  will  be  pleased  to  receive  orders. 

Purchase  of  Uxiteo  States  Boxds  by  Federal  Reserve  Banks. — Fed- 
eral Reserve  Banks  have  an  unlimited  right  to  purchase  United  States 
bonds  in  the  open  market.  They  may  also,  under  the  provisions  of 
Section  18,  be  permitted  or  required,  after  December  23,  1915,  to  pur- 
chase bonds  bearing  the  circulation  privilege,  up  to  an  amount  not  ex- 
ceeding $25,000,000  a  year,  from  member  banks  which  make  proper  ap- 
plication to  the  Treasurer  of  the  United  States.  In  order  to  deter- 
mine the  amount  any  one  reserve  bank  shall  buy  under  Section  18  in 
any  one  year,  it  is  necessary  to  allot  to  each  bank  its  own  propor- 
tionate share  of  the  entire  sum  offered  for  sale  through  the  Treasurer 

*This  is  apparently  an  error  in  the  Act.  Reference  should  have  been 
made  to  Section  14. 


and  deduct  therefrom  the  amount  of  bonds  bearing  the  circulation 
privilege  bought  by  such  bank  in  the  open  market  within  that  year. 
(Opinion  of  Counsel  of  Board,  April  22,  1915.) 

Additional  Circulation  After  Sale  of  Bonds. — A  National  bank 
which  reduced  the  amount  of  its  circulating  notes  by  the  sale  of  bonds 
may  take  out  additional  circulation  on  the  security  of  other  bonds 
bought  in  the  open  market.     (Informal  Ruling  of  Board,  Jan.  6,  1916.) 


§  56.  United  States  Bonds  Defined- The  term  "United  States 
bond,"  as  used  throughout  this  chapter,  shall  be  construed  to  mean 
registered  bonds  of  the  United  States.  (Rev.  Stat.  U.  S.  Sec. 
5158.) 


Bonds  issued  under  the  Postal  Savings  Depositories  Law  can  not  be 
deposited  as  security  for  circulating  notes,  nor  can  Liberty  or  Victory 
bonds. 


§  57.  Exchange  of  Coupon  Bonds  Authorized. —  The  Secretary 
of  the  Treasury  is  authorized  to  receive  from  any  association,  and 
cancel,  any  United  States  coupon  bonds,  and  to  issue  in  lieu  thereof 
registered  bonds  of  like  amount,  bearing  a  like  rate  of  interest  and 
having  the  same  time  to  run.    (Eev.  Stat.  U.  S.  Sec.  5161.) 


Coupon  bonds,  as  well  as  registered  bonds  properly  transferred,  are 
usually  sent  to  the  office  of  the  Comptroller  of  the  Currency  by  regis- 
tered mail  or  express,  and  the  bond  clerk  in  that  office  takes  the  neces- 
sary steps  to  convert  the  coupon  bonds  into  registered,  and  to  turn 
over  the  bonds  in  due  course  to  the  custody  of  the  Treasurer  of  the 
United  States  In  trust  for  the  bank. 


§  58.  Exchange  for  Two  Per  Cent.  Bonds  Authorized. —  Under 
regulations  to  be  prescribed  by  the  Secretary  of  the  Treasury  any 
National  banking  association  may  substitute  the  two  per  centum 
bonds  issued  under  the  provisions  of  this  Act  for  any  of  the  bonds 
deposited  with  the  Treasurer  to  secure  circulation  or  to  secure 
deposits  of  public  money.  (Act  Mfcrch  14,  1900,  Sec.  12;  31 
Stat.  L.,  49.) 


77 

§  59.  Basis  of  Exchange. — Such  outstanding  bonds  may  be  re- 
ceived in  exchange  at  a  valuation  not  greater  than  their  present 
worth  to  yield  an  income  of  two  and  one-quarter  per  centum  per 
annum;  and  in  consideration  of  the  reduction  of  interest  effected, 
the  Secretary  of  the  Treasury  is  authorized  to  pay  the  holders  of 
the  outstanding  bonds  surrendered  for  exchange,  out  of  any  money 
in  the  Treasury  not  otherwise  appropriated,  a  sum  not  greater  than 
the  difference  between  their  present  worth,  computed  as  afore- 
said, and  their  par  value,  and  the  payments  to  be  made  hereunder 
shall  be  held  to  be  payments  on  account  of  the  sinking  fund  created 
by  section  thirty-six  hundred  and  ninety-four  of  the  Eevised 
Statutes.     (Sec.  11,  Act  March  14,  1900;  31  Stat.  L.,  48.) 

§  60.  Issue  of  Two  Per  Cent.  Bonds  Authorized.— The  Secretary 
of  the  Treasury  is  hereby  authorized  to  receive  at  the  Treasury  any 
of  the  outstanding  bonds  of  the  United  States  bearing  interest  at 
five  per  centum  per  annum,  payable  February  first,  nineteen  hun- 
dred and  four,  and  any  bonds  of  the  United  States  bearing  interest 
at  four  per  centum  per  annum,  payable  July  first,  nineteen  hun- 
dred and  seven,  and  any  bonds  of  the  United  States  bearing  in- 
terest at  three  per  centum  per  annum,  payable  August  first,  nine- 
teen hundred  and  eight,  and  to  issue  in  exchange  therefor  an  equal 
amount  of  coupon  or  registered  bonds  of  the  United  States  in  such 
form  as  he  may  prescribe,  in  denominations  of  fifty  dollars  or  any 
multiple  thereof,  bearing  interest  at  the  rate  of  two  per  centum  per 
annum,  payable  quarterly,  such  bonds  to  be  payable  at  the  pleasure 
of  the  United  States  after  thirty  years  from  the  date  of  their 
issue,  and  said  bonds  to  be  payable,  principal  and  interest,  in  gold 
coin  of  the  present  standard  value,  and  to  be  exempt  from  the 
payment  of  all  taxes  or  duties  of  the  United  States,  as  well  as 
from  taxation  in  any  form  by  or  under  State,  municipal,  or  local 
authority.     (Sec.  11,  Act  March  14,  1900;  31  Stat.  L.,  48.) 

§  61.  Two  Per  Cent.  Bonds  to  be  Issued  at  Par — How  Numbered 
and  Paid — Interest.—  The  two  per  centum  bonds  to  be  issued  un- 
der the  provisions  of  this  Act  shall  be  issued  at  not  less  than  par, 
and  they  shall  be  numbered  consecutively  in  the  order  of  their 


78 

issue,  and  when  payment  is  made  the  last  numbers  issued  shall  be 
first  paid,  and  this  order  shall  be  followed  until  all  the  bonds 
are  paid;  and  whenever  any  of  the  outstanding  bonds  are  called 
for  payment,  interest  thereon  shall  cease  three  months  after  such 
call.     (Sec.  11,  Act  March  14,  1900;  31  Stat.  L.,  18.) 

§  62.  Deposit  of  Bonds  Issued  Under  Panama  Canal  Act. — The 
two  per  cent,  bonds  of  the  United  States  authorized  by  section 
eight  of  the  act  entitled  "An  act  to  provide  for  the  construction 
of  a  canal  connecting  the  waters  of  the  Atlantic  and  Pacific  oceans," 
approved  June  twenty-eighth,  nineteen  hundred  and  two,  shall  have 
all  the  rights  and  privileges  accorded  by  law  to  other  two  per  cent, 
bonds  of  the  United  States.  (Sec.  11,  Act  Dec.  21,  1905;  34 
Stat.  L.,  5.) 

§  63.  Bonds  Issued  Under  Act  of  1909  Not  Available. —  That 
the  Secretary  of  the  Treasury  be,  and  he  is  hereby,  authorized  to 
insert  in  the  bonds  to  be  issued  by  him  under  section  thirty-nine 
of  an  Act  entitled  "An  Act  to  provide  revenue,  equalize  duties,  and 
encourage  the  industries  of  the  United  States,  and  for  other  pur- 
poses," approved  August  fifth,  nineteen  hundred  and  nine,  a  pro- 
vision that  such  bonds  shall  not  be  receivable  by  the  Treasurer  of 
the  United  States  as  security  for  the  issue  of  circulating  notes  to 
National  banks ;  and  the  bonds  containing  such  provision  shall  not 
be  receivable  for  that  purpose.  (Act  March  2,  1911,  Ch.  195; 
36  Stat.  L.,  1013.) 

§  64.  Bonds  to  be  Held  as  Security  for  Circulating  Notes — 
Interest. — The  bonds  transferred  to  and  deposited  with  the 
Treasurer  of  the  United  States  by  any  association,  for  the  se- 
curity of  its  circulating  notes,  shall  be  held  exclusively  for  that 
purpose  until  such  notes  are  redeemed,  except  as  provided  in  this 
Title.  The  Comptroller  of  the  Currency  shall  give  to  any  such 
association  powers  of  attorney  to  receive  and  appropriate  to  its 
own  use  the  interest  on  the  bonds  which  it  has  so  transferred  to 
the  Treasurer;  but  such  powers  shall  become  inoperative  whenever 
such  association  fails  to  redeem  its  circulating  notes.  (Rev.  Stat. 
U.  S.  Sec.  5167.) 


79 

§  G5.  Where  Value  of  Bonds  Has  Depreciated.— Whenever  the 
market  or  cash  value  of  any  bonds  thus  deposited  with  the  Treas- 
urer is  reduced  below  the  amount  of  the  circulation  issued  for 
the  same,  the  Comptroller  may  demand  and  receive  the  amount  of 
such  depreciation  in  other  United  States  bonds  at  cash  value,  or  in 
money,  from  the  association,  to  be  deposited  with  the  Treasurer  as 
long  as  such  depreciation  continues.     (Eev.  Stat.  U.  S.  Sec.  5167.) 

§  66.  Exchange  for  Other  Bonds.— The  Comptroller,  upon  the 
terms  prescribed  by  the  Secretary  of  the  Treasury,  may  permit 
an  exchange  to  be  made  of  any  of  the  bonds  deposited  with  the 
Treasurer  by  any  associations  for  other  bonds  of  the  United  States 
authorized  to  be  received  as  security  for  circulating  notes,  if  he 
is  of  opinion  that  such  an  exchange  can  be  made  without  prejudice 
to  the  United  States;  and  he  may  direct  the  return  of  any  bonds 
to  the  association  which  transferred  the  same,  in  sums  of  not  less 
than  one  thousand  dollars,  upon  the  surrender  to  him  and  the  can- 
cellation of  a  proportionate  amount  of  such  circulating  notes : 
Provided,  That  the  remaining  bonds  which  shall  have  been  trans- 
ferred by  the  association  offering  to  surrender  circulating  notes  are 
equal  to  the  amount  required  for  the  circulating  notes  not  surren- 
dered by  such  association  [and  that  the  amount  of  bonds  in  the 
hands  of  the  Treasurer  is  not  diminished  below  the  amount  re- 
quired to  be  kept  on  deposit  with  him],*  and  that  there  has  been 
no  failure  by  the  association  to  redeem  its  circulating  notes,  nor 
any  other  violation  by  it  of  the  provisions  of  this  Title,  and  that 
the  market  or  cash  value  of  the  remaining  bonds  is  not  below  the 
amount  required  for  the  circulation  issued  for  the  same.  (Eev. 
Stat.  U.  S.  Sec.  5167.) 

§  67.  Transfer  of  Bonds  to  and  by  Treasurer. — All  transfers  of 
United  States  bonds  made  by  any  association  under  the  provisions 
of  this  Title  shall  be  made  to  the  Treasurer  of  the  United  States 
in  trust  for  the  association,  with  a  memorandum  written  or  printed 
on  each  bond,  and  signed  by  the  cashier  or  some  other  officer  of  the 
association  making  the  deposit.    A  receipt  shall  be  given  to  the  as- 

*See  Section  54  which  repeals  this  clause. 


80 

sociation  by  the  Comptroller  of  the  Currency,  or  by  a  clerk  ap- 
pointed by  him  for  that  purpose,  stating  that  the  bond  is  held  in 
trust  for  the  association  on  whose  behalf  the  transfer  is  made,  and 
as  security  for  the  redemption  and  payment  of  any  circulating 
notes  that  have  been  or  may  be  delivered  to  such  association.  No 
assignment  or  transfer  of  any  such  bond  by  the  Treasurer  shall  be 
deemed  valid  unless  countersigned  by  the  Comptroller  of  the  Cur- 
rency.    (Rev.  Stat.  U.  S.  Sec.  5162.) 

For  full  instructions  on  the  deposit  and  withdrawal  of  bonds  see 
Chapter  V,  Part  IV. 

§  68.  Registry  of  Bond  Transfers. —  The  Comptroller  of  the 
Currency  shall  keep  in  his  office  a  book,  in  which  he  shall  cause  to 
be  entered,  immediately  upon  countersigning  it,  every  transfer  or 
assignment  by  the  Treasurer  of  any  bonds  belonging  to  a  National 
banking  association  presented  for  his  signature.  He  shall  state  in 
such  entry  the  name  of  the  association  from  whose  account  the 
transfer  is  made,  the  name  of  the  party  to  whom  it  is  made,  and 
the  par  value  of  the  bonds  transferred.  (Rev.  Stat.  U.  S.  Sec. 
5163.) 

§  69.  Association  to  be  Advised  of  Transfers. — The  Comptroller 
of  the  Currency  shall,  immediately  upon  countersigning  and  enter- 
ing any  transfer  or  assignment  by  the  Treasurer  of  any  bonds  be- 
longing to  a  National  banking  association,  advise  by  mail  the 
association  from  whose  accounts  the  transfer  is  made  of  the  kind 
and  numerical  designation  of  the  bonds  and  the  amount  thereof 
so  transferred.     (Rev.  Stat.  U.  S.  Sec.  5164.) 

§  70.  Comptroller  and  Treasurer  to  Have  Access  to  Books. — The 
Comptroller  of  the  Currency  shall  have  at  all  times,  during  office 
hours,  access  to  the  books  of  the  Treasurer  of  the  United  States  for 
the  purpose  of  ascertaining  the  correctness  of  any  transfer  or  as- 
signment of  the  bonds  deposited  by  an  association,  presented  to  the 
Comptroller  to  countersign;  and  the  Treasurer  shall  have  the  like 
access  to  the  book  mentioned  in  section  fifty-one  hundred  and  sixty- 


81 

three,  during  office  hours,  to  ascertain  the  correctness  of  the  entries 
in  the  same ;  and  the  Comptroller  shall  also  at  all  times  have  access 
to  the  bonds  on  deposit  with  the  Treasurer  to  ascertain  their 
amount  and  condition.     (Rev.  Stat.  U.  S.  Sec.  5165.) 

§  71.  Annual  Examination  of  Bonds. — Every  association  having 
bonds  deposited  in  the  office  of  the  Treasurer  of  the  United  States 
shall,  once  or  oftener  in  each  fiscal  year,  examine  and  compare  the 
bonds  pledged  by  the  association  with  the  books  of  the  Comptroller 
of  the  Currency  and  with  the  accounts  of  the  association,  and,  if 
they  are  found  correct,  to  execute  to  the  Treasurer  a  certificate 
setting  forth  the  different  kinds  and  the  amounts  thereof,  and  that 
the  same  are  in  the  possession  and  custody  of  the  Treasurer  at  the 
date  of  the  certificate.  Such  examination  shall  he  made  at  such 
a  time  or  times  during  the  ordinary  business  hours  as  the  Treasurer 
and  the  Comptroller,  respectively,  may  select,  and  may  be  made  by 
an  officer  or  agent  of  such  association  duly  appointed  in  writing  for 
that  purpose;  and  his  certificate  before  mentioned  shall  be  of  like 
force  and  validity  as  if  executed  by  the  president  or  cashier.  A 
duplicate  of  such  certificate,  signed  by  the  Treasurer,  shall  be  re- 
tained by  the  association.     (Rev.  Stat.  IT.  S.  Sec.  5166.) 

This  section  throws  upon  the  association  the  direct  responsibility  of 
ascertaining  the  safety  and  actual  presetoce  on  deposit  of  the  bonds 
held  in  trust  for  it  by  the  Treasurer.  The  examination  is  made  in 
practically  all  cases  by  the  bank's  accredited  agent,  and  we  render  this 
service  for  a  large  number  of  banks.  For  full  details  see  Chapter 
V,  Part  IV. 

72.  Delivery  of  Circulation  to  Associations — Amount  of. — 

Upon  the  deposit  with  the  Treasurer  of  the  United  States,  by  any 
National  banking  association,  of  any  bonds  of  the  United  States 
in  the  manner  provided  by  existing  law,  such  association  shall  be 
entitled  to  receive  from  the  Comptroller  of  the  Currency  circulating 
notes  in  blank,  registered  and  countersigned  as  provided  by  law, 
equal  in  amount  to  the  par  value  of  the  bonds  so  deposited;  and 
any  National  banking  association  now  having  bonds  on  deposit  for 
the  security  of  circulating  notes,  and  upon  which  an  amount  of 
6 


82 

circulating  notes  has  been  issued  less  than  the  par  value  of  the 
bonds,  shall  be  entitled,  upon  due  application  to  the  Comptroller 
of  the  Currency,  to  receive  additional  circulating  notes  in  blank 
to  an  amount  which  will  increase  the  circulating  notes  held  by 
such  association  to  the  par  value  of  the  bonds  deposited,  such  ad- 
ditional notes  to  be  held  and  treated  in  the  same  way  as  circu- 
lating notes  of  National  banking  associations  heretofore  issued, 
and  subject  to  all  the  provisions  of  law  affecting  such  notes :  Pro- 
vided, That  nothing  herein  contained  shall  be  construed  to  modify 
or  repeal  the  provisions  of  section  fifty-one  hundred  and  sixty- 
seven  of  the  Eevised  Statutes  of  the  United  States,  authorizing 
the  Comptroller  of  the  Currency  to  require  additional  deposits  of 
bonds  or  of  lawful  money  in  case  the  market  value  of  the  bonds 
held  to  secure  the  circulating  notes  shall  fall  below  the  par  value 
of  the  circulating  notes  outstanding  for  which  such  bonds  may  be 
deposited  as  security.  (Act  March  14,  1900,  Ch.  41,  Sec.  12;  31 
Stat.  L.,  49.) 

§  73.  Notes  May  Equal  Capital  Stock  Paid  In. — The  total 
amount  of  such  notes  issued  to  any  such  association  may  equal  at 
any  time  but  shall  not  exceed  the  amount  at  such  time  of  its 
capital  stock  actually  paid  in.  (Act  March  14,  1900,  Sec.  12; 
31  Stat.  L.,  49.) 

§  74.  Eank  Which  Has  Retired  Notes  May  Increase  Circulation. 

— So  much  of  an  Act  entitled  "An  Act  to  enable  National  bank- 
ing associations  to  extend  their  corporate  existence,  and  for  other 
purposes,"  approved  July  twelfth,  eighteen  hundred  and  eighty- 
two,  as  prohibits  any  National  bank  which  makes  any  deposit  of 
lawful  money  in  order  to  withdraw  its  circulating  notes  from  re- 
ceiving any  increase  of  its  circulation  for  the  period  of  six  months 
from  the  time  it  made  such  deposit  of  lawful  money  for  the  pur- 
pose aforesaid,  is  hereby  repealed,  and  all  other  Acts  or  parts  of 
Acts  inconsistent  with  the  provisions  of  this  section  are  hereby 
repealed.     (Act  March  14,  1900,  Sec.  12;  31  Stat.  L.,  49.) 

§  75.  Denomination  and  limitation  of  Notes. — That  the  Act 
of  June  third,  eighteen  hundred  and  sixty-four,  Eevised  Statutes, 


83 

section  fifty-one  hundred  and  seventy-five,  which  prohibits  national 
banks  from  being  furnished  with  notes  of  less  denomination  than 
$5,  be,  and  it  is  hereby,  repealed. 

Sec.  2.  That  that  part  of  the  Act  of  March  fourteenth,  nine- 
teen hundred,  which  provides  "that  no  National  banking  associa- 
tion shall,  after  the  passage  of  this  Act,  be  entitled  to  receive  from 
the  Comptroller  of  the  Currency,  or  to  issue  or  reissue,  or  place 
in  circulation  more  than  one-third  in  amount  of  its  circulating 
notes  of  the  denomination  of  $5,"  be,  and  it  is  hereby,  repealed. 

Sec.  3.  That  from  and  after  the  passage  of  this  Act  any  Na- 
tional banking  association,  upon  compliance  with  the  provisions 
of  law  applicable  thereto,  shall  be  entitled  to  receive  from  the 
Comptroller  of  the  Currency,  or  to  issue  or  reissue,  or  place  in 
circulation  notes  in  denominations  of  $1,  $2,  $5,  $10,  $20,  $50,  and 
$100  in  such  proportion  as  to  each  of  said  denominations  as  the 
bank  may  elect:  Provided,  however,  That  no  bank  shall  receive 
or  have  in  circulation  at  any  one  time  more  than  $25,000  in  notes 
of  the  denominations  of  $1  and  $2. 

Sec.  4.  That  all  Acts  or  parts  of  Acts  which  are  inconsistent 
with  this  Act  are  hereby  repealed.  (Act  Oct.  5,  1917,  repealing 
Eev.  Stat.  U.  S.  Sec.  5175  and  part  of  Sec.  12,  Act  March  14, 
1900.) 

§  76.  Printing1  of  Circulating  Notes — Denominations — Tenor. — 

That  in  order  to  furnish  suitable  notes  for  circulation,  the  Comp- 
troller of  the  Currency  shall,  under  the  direction  of  the  Secretary 
of  the  Treasury,  cause  plates  and  dies  to  be  engraved,  in  the  best 
manner  to  guard  against  counterfeiting  and  fraudulent  alterations, 
and  shall  have  printed  therefrom  and  numbered  such  quantity 
of  circulating  notes  in  blank,  or  bearing  engraved  signatures  of 
officers  as  herein  provided,  of  the  denominations  of  $1,  $2,  $5, 
$10,  $20,  $50,  $100,  $500,  and  $1,000,  as  may  be  required  to 
supply  the  associations  entitled  to  receive  the  same.  Such  notes 
shall  express  upon  their  face  that  they  are  secured  by  United  States 
bonds  deposited  with  the  Treasurer  of  the  United  States,  by  the 
written  or  engraved  signatures  of  the  Treasurer  and  Register, 
and  by  the  imprint  of  the  seal  of  the  Treasury;  and  shall  also 


84 

express  upon  their  face  the  promise  of  the  association  receiving 
the  same  to  pay  on  demand,  attested  by  the  written  or  engraved 
signatures  of  the  president  or  vice  president  and  cashier;  and 
shall  bear  such  devices  and  such  other  statements  and  shall  be 
in  such  form  as  the  Secretary  of  the  Treasury  shall,  by  regula- 
tion, direct.  (Rev.  Stat.  U.  S.  Sec.  5172,  as  amended  by  Sec.  4, 
Act  March  3,  1919.) 

§  77.  Plates  and  Dies — Expenses  of  Bureau. —  The  plates  and 
special  dies  to  be  procured  by  the  Comptroller  of  the  Currency  for 
the  printing  of  such  circulating  notes  shall  remain  under  his  con- 
trol and  direction,  and  the  expenses  necessarily  incurred  in  execut- 
ing the  laws  respecting  the  procuring  of  such  notes,  and  all  other 
expenses  of  the  Bureau  of  the  Currency,  shall  be  paid  out  of  the 
proceeds  of  the  taxes  or  duties  assessed  and  collected  on  the  circula- 
tion of  National  banking  associations  under  this  Title.  (Rev. 
Stat.  U.  S.  Sec.  5173.) 

§  78.  Charter  Number  of  Bank  to  be  Printed  on  Its  Notes. — ■ 
That  the  Comptroller  of  the  Currency  shall,  under  such  rules  and 
regulations  as  the  Secretary  of  the  Treasury  may  prescribe,  cause 
the  charter  numbers  of  the  association  to  be  printed  upon  all 
National  bank  notes  which  may  be  hereafter  issued  by  him.  (Act 
June  20,  1874,  Ch.  343,  Sec.  5;  18  Stat.  L.,  124.) 

§  79.  Annual  Examination  of  Plates,  Dies,  etc.— The  Comp- 
troller of  the  Currency  shall  cause  to  be  examined,  each  year,  the 
plates,  dies,  but-pieces  (bed-pieces),  and  other  material  from  which 
the  National  bank  circulation  is  printed,  in  whole  or  in  part,  and 
file  in  his  office  annually  a  correct  list  of  the  same.  Such  ma- 
terial as  shall  have  been  used  in  the  printing  of  the  notes  of 
associations  which  are  in  liquidation,  or  have  closed  business,  shall 
be  destroyed  under  such  regulations  as  shall  be  prescribed  by  the 
Comptroller  of  the  Currency  and  approved  by  the  Secretary  of  the 
Treasury.  The  expenses  of  any  such  examination  or  destruction 
shall  be  paid  out  of  any  appropriation  made  by  Congress  for  the 


85 

special  examination  of  National  banks  and  bank-note  plates.     (Rev. 
Stat.  IT.  S.  Sec.  5174;  Act  Feb.  27,  1877,  c.  69;  19  Stat.  L.,  252.) 

§  80.  Repeal  of  Limit  of  Circulation,  etc. — 'That  section  five 
thousand  one  hundred  and  seventy-seven  of  the  Eevised  Statutes, 
limiting  the  aggregate  amount  of  circulating  notes  of  National 
banking  associations,  be,  and  is  hereby,  repealed;  and  each  exist- 
ing banking  association  may  increase  its  circulating  notes  in  ac- 
cordance with  existing  law  without  respect  to  said  aggregate  limit; 
and  new  banking  associations  may  be  organized  in  accordance  with 
existing  law  without  respect  to  said  aggregate  limit;  and  the  pro- 
visions of  law  for  the  withdrawal  and  redistribution  of  National 
bank  currency  among  the  several  States  and  Territories  are  hereby 
repealed.     (Act.  Jan.  14,  1875,  Ch.  15,  Sec.  3;  18  Stat.  L.,  296.) 

§  81.  Circulating1  Notes — For  What  Receivable. — Any  associa- 
tion receiving  circulating  notes  under  this  title  may,  if  its  promise 
to  pay  such  notes  on  demand  is  expressed  thereon  attested  by  the 
written  or  engraved  signatures  of  the  president  or  vice  president 
and  the  cashier  thereof  in  such  manner  as  to  make  them  obliga- 
tory promissory  notes  payable  on  demand  at  its  place  of  business, 
issue,  and  circulate  the  same  as  money.  Such  written  or  engraved 
signatures  of  the  president  or  vice  president  and  the  cashier  of 
such  association  may  be  attached  to  such  notes  either  before  or 
after  the  receipt  of  such  notes  by  such  association.  And  such 
notes  shall  be  received  at  par  in  all  parts  of  the  United  States  in 
payment  of  taxes,  excises,  public  lands,  and  all  other  dues  to  the 
United  States,  except  duties  on  imports;  and  also  for  all  salaries 
and  other  debts  and  demands  owing  by  the  United  States  to  indi- 
viduals, corporations,  and  associations  within  the  United  States, 
except  interest  on  the  public  debt,  and  in  redemption  of  the  Na- 
tional currency.  (Eev.  Stat.  Sec.  5182,  as  amended  by  Act  ap- 
proved Jan.  13,  1920.) 

§  82.  Bank  Liable  Though  Notes  Not  Signed  or  Signatures 
Forged. —  That  the  provisions  of  the  Eevised  Statutes  of  the 
United  States,  providing  for  the  redemption  of  National  bank 


SG 

notes,  shall  apply  to  all  National  bank  notes  that  have  been  or  may 
be  issued  to,  or  received  by,  any  National  bank,  notwithstanding 
such  notes  may  have  been  lost  or  stolen  from  the  bank  and  put  in 
circulation  without  the  signature  or  upon  the  forged  signature  of 
the  president  or  vice  president  and  cashier.  (Act  July  28,  1892, 
Ch.  317;  27  Stat.  L.,  322.) 

§  83.  Issue  of  Other  Notes  Prohibited. — No  National  banking 
association  shall  issue  post-notes  or  any  other  notes  to  circulate  as 
money  than  such  as  are  authorized  by  the  provisions  of  this  Title. 
(Eev.  Stat.  U.  S.  Sec.  5183.) 

Applies  to  Cihcueatixg  Notes. — 'This  section  applies  only  -where 
the  instruments  are  issued  to  "circulate  as  money,"  and  where  this  is 
not  the  purpose  they  are  not  within  the  prohibition.  (Hunt,  Appellant, 
141  Mass.,  515;  Riddle  v.  First  Nat.  Bank,  27  Fed.  Rep.,  503.)  Thus, 
it  has  been  held,  that  this  section  does  not  forbid  the  issue  of  cer- 
tificates of  deposit.  (See  cases  cited  above.)  Nor  does  it  forbid  the 
certification  of  checks,  although  the  purpose  of  a  certification,  by 
making  the  check  primarily  the  obligation  of  the  bank,  is  to  give  it 
currency  so  that  it  may  pass  freely  from  hand  to  hand.  (See  Mer- 
chants' National  Bank  v.  State  National  Bank,  10  Wallace,  604.) 

§  84.  Destroying  and  Replacing  Mutilated  Notes. — It  shall  be 
the  duty  of  the  Comptroller  of  the  Currency  to  receive  worn-out  or 
mutilated  circulating  notes  issued  by  any  banking  association,  and 
also,  on  due  proof  of  the  destruction  of  any  such  circulating  notes, 
to  deliver  in  place  thereof  to  the  association  other  blank  circulating 
notes  to  an  equal  amount.  Such  worn-out  or  mutilated  notes, 
after  a  memorandum  has  been  entered  in  the  proper  books,  in  ac- 
cordance with  such  regulations  as  may  be  established  by  the  Comp- 
troller, as  well  as  all  circulating  notes  which  shall  have  been  paid 
or  surrendered  to  be  cancelled,  shall  be  burned  *  to  ashes  in  pres- 
ence of  four  persons,  one  to  be  appointed  by  the  Secretary  of  the 
Treasury,  one  by  the  Comptroller  of  the  Currency,  one  by  the 
Treasurer  of  the  United  States,  and  one  by  the  association,  under 
such  regulations  as  the  Secretary  of  the  Treasury  may  prescribe. 
A  certificate  of  such  burning,  signed  by  the  parties  so  appointed, 

*See  Section  108,  which  provides  for  destruction  by  maceration. 


87 

shall  be  made  in  the  books  of  the  Comptroller,  and  a  duplicate 
thereof  forwarded  to  the  association  whose  notes  are  thus  cancelled. 
(Eev.  Stat.  U.  S.  Sec.  5184.) 

This  section  makes  it  mandatory  for  National  banks  with  circula- 
tion to  appoint  a  representative  to  witness  the  destruction  of  multilated 
notes.  We  act  in  this  capacity  for  a  large  number  of  banks.  For  full 
details  and  forms  see  Chapter  V,  Part  IV. 

§  85.  National  Gold  Banks.— As  no  National  gold  banks  are 
now  in  existence  the  provisions  of  the  National  Bank  Act  relating 
thereto  are  omitted. 

§  86.  Imitation  of  National  Bank  Notes — Punishment  for. — 
See  Chapter  on  Crimes  and  Misdemeanors,  page  182. 

§  87.  Penalty  for  Mutilating  Notes,  etc.— See  Chapter  on 
Crimes  and  Misdemeanors,  page  183. 

§  88.  Bank  to  Redeem  Its  Notes  at  Its  Counter.— This  section 
shall  not  relieve  any  association  from  its  liability  to  redeem  its 
circulating  notes  at  its  own  counter,  at  par,  in  lawful  money  on 
demand.     (Rev.  Stat.  IT.  S.  Sec.  5195.) 

The  other  provisions  of  the  section  required  the  selection  of  banks 
in  certain  cities  as  redemption  agents.  These  provisions  were  repealed 
by  the  act  of  June  30,  1874.     See  next  section. 

§  89.  Redemption  Fund ;  Redemption  of  Notes  at  United  States 
Treasury. — That  every  association  organized,  or  to  be  organized, 
under  the  provisions  of  the  said  act,  and  of  the  several  acts  amen- 
datory thereof,  shall  at  all  times  keep  and  have  on  deposit  in  the 
Treasury  of  the  United  States,  in  lawful  money  of  the  United 
States,  a  sum  equal  to  five  per  centum  of  its  circulation,  to  be 
held  and  used  for  the  redemption  of  such  circulation  [which  sum 
shall  be  counted  as  a  part  of  its  lawful  reserve,  as  provided  in 
section  two  of  this  act]  ;*  and  when  the  circulating  notes  of  any 
such  associations,  assorted  or  unassorted,  shall  be  presented  for  re- 
demption, in  sums  of  one  thousand  dollars  or  any  multiple  thereof, 

♦Repealed  by  Section  20  of  Federal  Reserve  Act. 


88 

to  the  Treasurer  of  the  United  States,  the  same  shall  be  redeemed 
in  United  States  notes.  All  notes  so  redeemed  shall  be  charged 
by  the  Treasurer  of  the  United  States  to  the  respective  associations 
issuing  the  same,  and  he  shall  notify  them  severally  on  the  first 
day  of  each  month,  or  oftener,  at  his  discretion,  of  the  amount  of 
such  redemptions ;  and  whenever  such  redemptions  for  any  associa- 
tion shall  amount  to  the  sum  of  five  hundred  dollars,  such  asso- 
ciation so  notified  shall  forthwith  deposit  with  the  Treasurer  of 
the  United  States  a  sum  in  United  States  notes  equal  to  the 
amount  of  its  circulating  notes  so  redeemed.  And  all  notes  of 
National  banks,  worn,  defaced,  mutilated,  or  otherwise  unfit  for 
circulation,  shall,  when  received  by  any  Assistant  Treasurer,  or  at 
any  designated  depository  of  the  United  States,  be  forwarded  to 
the  Treasurer  of  the  United  States  for  redemption,  as  provided 
herein.  And  when  such  redemptions  have  been  so  reimbursed,  the 
circulating  notes  so  redeemed  shall  be  forwarded  to  the  respective 
associations  by  which  they  were  issued ;  but  if  any  of  such  notes  are 
worn,  mutilated,  defaced,  or  rendered  otherwise  unfit  for  use, 
they  shall  be  forwarded  to  the  Comptroller  of  the  Currency  and 
destroyed,  and  replaced  as  now  provided  by  law.*  .  .  .  And 
provided  further,  That  so  much  of  section  thirty-two  of  said  Na- 
tional Bank  Act  requiring  or  permitting  the  redemption  of  its 
circulating  notes  elsewhere  than  at  its  own  counter,  except  as 
provided  for  in  tins  section,  is  hereby  repealed.  (Act  June  20, 
1874,  Ch.  343,  Sec.  3 ;  18  Stat.  L.,  123.) 


For  full  particulars  on  the  five  per  cent,  fund  and  on  the  redemp- 
tion of  currency  see  Chapter  V,  Part  IV. 


§  90.  Redemption  Fund  Covered  into  Treasury. — That  upon 
the  passage  of  this  act  the  balances  standing  with  the  Treasurer 
of  the  United  States  to  the  respective  credits  of  National  banks 
for  deposits  made  to  redeem  the  circulating  notes  of  such  banks, 
and  all  deposits  thereafter  received  for  like  purpose,  shall  be  cov- 

*The  provision  omitted  requires  the  banks  to  reimburse  the  Treasury 
the  expense  incurred. 


89 

ered  into  the  Treasury  as  a  miscellaneous  receipt,  and  the  Treas- 
urer of  the  United  States  shall  redeem  from  the  general  cash  in 
the  Treasury  the  circulating  notes  of  said  banks  which  may  come 
into  his  possession  subject  to  redemption,  and  upon  the  certifi- 
cate of  the  Comptroller  of  the  Currency  that  such  notes  have  been 
received  by  him  and  that  they  have  been  destroyed  and  that  no 
new  notes  will  be  issued  in  their  place,  reimbursement  of  their 
amount  shall  be  made  to  the  Treasurer,  under  such  regulations  as 
the  Secretary  of  the  Treasury  may  prescribe,  from  an  appropria- 
tion hereby  created,  to  be  known  as  National  bank  notes  Redemp- 
tion account,  but  the  provisions  of  this  act  shall  not  apply  to  the 
deposits  received  under  section  three  of  the  Act  of  June  twentieth, 
eighteen  hundred  and  seventy-four,  requiring  every  National  bank 
to  keep  in  lawful  money  with  the  Treasurer  of  the  United  States 
a  sum  equal  to  five  per  centum  of  its  circulation,  to  be  held  and 
used  for  the  redemption  of  its  circulating  notes;  and  the  balance 
remaining  of  the  deposits  so  covered  shall,  at  the  close  of  each 
month,  be  reported  on  the  monthly  public  debt  statement,  as  debt 
of  the  United  States  bearing  no  interest.  (Act  July  14,  1890, 
Ch.  708,  Sec.  6;  26  Stat.  L.,  289.) 

§  91.  Retiring  Circulation. — That  any  association  organized 
under  this  act,  or  any  of  the  acts  of  which  this  is  an  amendment, 
desiring  to  withdraw  its  circulating  notes,  in  whole  or  in  part,  may, 
upon  the  deposit  of  lawful  money  with  the  Treasurer  of  the  United 
States  [in  sums  of  not  less  than  nine  thousand  dollars],*  take  up 
the  bonds  which  said  association  has  on  deposit  with  the  Treasurer 
for  the  security  of  such  circulating  notes,  which  bonds  shall  be  as- 
signed to  the  bank  in  the  manner  specified  in  the  nineteenth  sec- 
tion of  the  National  Bank  Act;  and  the  outstanding  notes  of  said 
association,  to  an  amount  equal  to  the  legal  tender  notes  deposited, 

*The  clauses  of  this  section  enclosed  in  brackets  were  repealed  by 
Section  17  of  the  Federal  Reserve  Act  as  amended  by  Section  9  of  the 
act  of  June  21.  1917.  (See  Section  54  ante).  National  banks  are  there- 
fore no  longer  required  to  make  deposit  of  bonds  as  a  condition  pre- 
cedent to  the  commencement  of  business,  or  to  make  or  maintain 
minimum  deposits. 


90 

shall  be  redeemed  at  the  Treasury  of  the  United  States,  and  de- 
stroyed as  now  provided  by  law:  [Provided,  That  the  amount  of 
the  bonds  on  deposit  for  circulation  shall  not  be  reduced  below 
fifty  thousand  dollars.]*  An  association  which  is  in  good  faith 
winding  up  its  business  for  the  purpose  of  consolidating  with  an- 
other association  shall  not  be  required  to  deposit  lawful  money  for 
its  outstanding  circulation;  but  its  assets  and  liabilities  shall  be 
reported  by  the  association  with  which  it  is  in  process  of  consolida- 
tion. (Act  June  20,  1874,  Ch.  343,  Sec.  4;  18  Stat.  U.  S.  124; 
Bev.  Stat.  TJ.  S.  5223.) 

§  92.  Same  Subject — Retiring  Circulation. — That  any  National 
banking  association,  now  organized  or  hereafter  organized,  desiring 
to  withdraw  its  circulating  notes,  upon  a  deposit  of  lawful  money 
with  the  Treasurer  of  the  United  States,  as  provided  in  section 
four  of  the  Act  of  June  twentieth,  eighteen  hundred  and  seventy- 
four,  or  as  provided  in  this  Act,  is  authorized  to  deposit  lawful 
money  and,  with  the  consent  of  the  Comptroller  of  the  Currency 
and  the  approval  of  the  Secretary  of  the  Treasury,  withdraw  a 
proportionate  amount  of  bonds  held  as  security  for  its  circulating 
notes  in  the  order  of  such  deposits :  Provided,  That  not  more  than 
nine  millions  of  dollars  of  lawful  money  shall  be  deposited  during 
any  calendar  month  for  this  purpose:  And  provided  further,  That 
the  provisions  of  this  section  shall  not  apply  to  bonds  called  for 
redemption  by  the  Secretary  of  the  Treasury,  nor  to  the  with- 
drawal of  circulating  notes  in  consequence  thereof.  (Act  July  12, 
1882,  Ch.  290,  Sec.  9;  22  Stat.  L.,  164;  Act  March  4,  1907,  Sec. 
4;  34  Stat.  L.,  1290.) 

The  provision  omitted  provided  that  "no  National  hank  which  makes 
any  deposit  of  lawful  money  in  order  to  withdraw  its  circulating  notes 
shall  be  entitled  to  receive  any  increase  of  its  circulation  for  the  period 
of  six  months  from  the  time  it  made  such  deposits  of  lawful  money  for 
the  purpose  aforesaid."    This  was  repealed  by  Act  March  14,  1900. 

§  93.  Circulating  Notes  of  Extended  Banks — Lawful  Money 
Deposit — Expense  of  New  Plates. — That  the  circulating  notes  of 
any  association  so  extending  the  period  of  its  succession,  which. 

*  Repealed.     See  §  54  Ante. 


91 

shall  have  been  issued  to  it  prior  to  such  extension,  shall  be  re- 
deemed at  the  Treasury  of  the  United  States,  as  provided  in  section 
three  of  the  Act  of  June  twentieth,  eighteen  hundred  and  seventy- 
four,  entitled  "An  Act  fixing  the  amount  of  United  States  notes, 
providing  for  redistribution  of  National  bank  currency,  and  for 
other  purposes,"  and  such  notes  when  redeemed  shall  be  forwarded 
to  the  Comptroller  of  the  Currency  and  destroyed,  as  now  pro- 
vided by  law;  and  at  the  end  of  three  years  from  the  date  of  the 
extension  of  the  corporate  existence  of  each  bank  the  association 
so  extended  shall  deposit  lawful  money  with  the  Treasurer  of  the 
United  States  sufficient  to  redeem  the  remainder  of  the  circula- 
tion which  was  outstanding  at  the  date  of  its  extension,  as  pro- 
vided in  sections  fifty-two  hundred  and  twenty-two,  fifty-two  hun- 
dred and  twenty-four,  and  fifty-two  hundred  and  twenty-five  of 
the  Eevised  Statutes;  and  any  gain  that  may  arise  from  the  fail- 
ure to  present  such  circulating  notes  for  redemption  shall  inure 
to  the  benefit  of  the  United  States ;  and  from  time  to  time,  as  such 
notes  are  redeemed  or  lawful  money  deposited  therefor  as  pro- 
vided herein,  new  circulating  notes  shall  be  issued  as  provided  for 
by  this  act,  bearing  such  devices,  to  be  approved  by  the  Secretary 
of  the  Treasury,  as  shall  make  them  readily  distinguishable  from 
the  circulating  notes  heretofore  issued:  Provided,  however,  That 
each  banking  association  which  shall  obtain  the  benefit  of  this  Act 
shall  reimburse  to  the  Treasury  the  cost  of  preparing  the  plate 
or  plates  for  such  new  circulating  notes  as  shall  be  issued  to  it. 
(Act  July  12,  1882,  Ch.  290,  Sec.  6;  22  Stat.  L.,  163.) 


§  94.  Deposit  to  Redeem  Circulation  of  Liquidating  Banks. — 

Within  six  months  from  the  date  of  the  vote  to  go  into  liquidation, 
the  association  shall  deposit  with  the  Treasurer  of  the  United 
States  lawful  money  of  the  United  States  sufficient  to  redeem  all 
its  outstanding  circulation.  The  Treasurer  shall  execute  duplicate 
receipts  for  money  thus  deposited,  and  deliver  one  to  the  associa- 
tion and  the  other  to  the  Comptroller  of  the  Currency,  stating  the 
amount  received  by  him,  and  the  purpose  for  which  it  has  been 
received;  and  the  money  shall  be  paid  into  the  Treasury  of  the 


92 

•United  States,  and  placed  to  the  credit  of  such,  association  upon 
redemption  account.     (Eev.  Stat.  U.  S.  Sec.  5222.) 

Limit  of  Time. — If  not  otherwise  determined,  the  vote  to  liquidate 
takes  effect  immediately,  and  the  six  months  run  from  that  date;  but 
if  the  vote  itself  is  that  the  liquidation  shall  take  place  at  a,  future 
date,  then  that  future  date  is  the  actual  date  on  which  the  vote  takes 
effect,  and  the  six  months  run  therefrom. 

Lawful  Money. — Lawful  money  is  United  States  gold  coin,  silver 
dollars  or  legal-tender  notes.     See  $346  ff. 

How  Deposit  Made. — The  usual  method  is  to  make  the  deposit  either 
directly  or  through  a  correspondent  or  agent  with  the  Treasurer  of 
the  United  States  at  Washington,  or  an  Assistant  Treasurer.  When 
the  depo'sit  is  made  with  an  Assistant  Treasurer,  he  issues  a  certificate 
of  deposit  which  is  sent  to  Washington.  When  the  deposit  is  made, 
and  the  bank  has  paid  to  the  United  States  Treasurer  all  amounts  due 
for  taxes  on  circulation  and  all  amounts  due  for  expenses  of  redeem- 
ing notes,  its  bonds  on  deposit  will  be  surrendered  to'  it.  We  are  al- 
ways glad  to  sell  such  bonds  for  liquidating  banks  and  can  arrange 
to  make  the  deposit  so  that  the  bank  will  not  put  up  any  money. 

§  95.  Reassignment  of  Bonds,  Redemption  of  Notes,  etc.,  in 
Such  Case. —  Whenever  a  sufficient  deposit  of  lawful  money  to  re- 
deem the  outstanding  circulation  of  an  association  proposing  to 
close  its  business  has  been  made,  the  bonds  deposited  by  the  asso- 
ciation to  secure  payment  of  its  notes  shall  be  reassigned  to  it  in 
the  manner  prescribed  by  section  fifty-one  hundred  and  sixty-two. 
And  thereafter  the  association  and  its  shareholders  shall  stand  dis- 
charged from  all  liabilities  upon  the  circulating  notes,  and  those 
notes  shall  be  redeemed  at  the  Treasury  of  the  United  States.  And 
if  any  such  bank  shall  fail  to  make  the  deposit  and  take  up  its 
bonds  thirty  days  after  the  expiration  of  the  time  specified,  the 
Comptroller  of  the  Currency  shall  have  power  to  sell  the  bonds 
pledged  for  the  circulation  of  said  bank,  at  public  auction  in  New 
York  city,  and  after  providing  for  the  redemption  and  cancella- 
tion of  said  circulation,  and  the  necessary  expenses  of  the  sale,  to 
pay  over  any  balance  remaining  to  the  bank  or  its  legal  representa- 
tive. (Rev.  Stat.  U.  S.  Sec.  5224;  Act  Feb.  18,  1875,  c.  80;  18 
Stat.  L.,  320.) 


93 

§  96.  Return  of  Notes  of  Failed  or  Liquidating  Banks.— .'And  it 

shall  be  the  duty  of  the  Treasurer,  assistant  treasurers,  designated 
depositaries  and  National  bank  depositaries  of  the  United  States 
*  *  *  to  assort  and  return  to  the  Treasury  for  redemption  the 
notes  of  such  National  banks  as  have  failed,  or  gone  into  volun- 
tary liquidation  for  the  purpose  of  winding  up  their  affairs,  and 
of  such  as  shall  hereafter  so  fail  or  go  into  liquidation.  (Act 
June  20,  1874,  Sec.  8;  18  Stat.  L.,  125.) 

§  97.  Destruction  of  Redeemed  Notes  of  Liquidating  Bank. — 
Whenever  the  Treasurer  has  redeemed  any  of  the  notes  of  an  asso- 
ciation which  lias  commenced  to  close  its  affairs  under  the  five 
preceding  sections,  he  shall  cause  the  notes  to  be  mutilated  and 
charged  to  the  redemption  account  of  the  association ;  and  all  notes 
so  redeemed  by  the  Treasurer  shall,  every  three  months,  be  certi- 
fied to  and  burned  *  in  the  manner  prescribed  in  section  fifty-one 
hundred  and  eighty-four.  (Rev.  Stat.  U.  S.  5225;  Act  Feb.  27, 
1877,  c.  69;  19  Stat.  L.,  252.) 

§  98.  Mode  of  Protesting  Notes. — Whenever  any  National 
banking  association  fails  to  redeem  in  the  lawful  money  of  the 
United  States  any  of  its  circulating  notes,  upon  demand  of  pay- 
ment duly  made  during  the  usual  hours  of  business,  at  the  office  of 
such  association,  [or  at  its  designated  place  of  redemption]  -!-  the 
holder  may  cause  the  same  to  be  protested,  in  one  package  by  a 
notary  public,  unless  the  president  or  cashier  of  the  association 
whose  notes  are  presented  for  payment,  or  the  president  or  cashier 
of  the  association  at  the  place  at  which  they  are  redeemable  f 
offers  to  waive  demand  and  notice  of  the  protest,  and,  in  pursuance 
of  such  offer,  makes,  signs,  and  delivers  to  the  party  making  such 
demand  an  admission  in  writing,  stating  the  time  of  the  demand, 
the  amount  demanded,  and  the  fact  of  the  non-payment  thereof. 

*  See  Section  108,  which  provides  that  such  notes  be  destroyed  by 
maceration. 

f  Circulation  is  redeemable  only  at  the  Treasury  or  over  the  counter 
of  the  association.  Designated  places  of  redemption  have  not  existed 
since  June  20,  1874. 


94 

The  notary  public,  on  making  such  protest,  or  upon  receiving  such 
admission,  shall  forthwith  forward  such  admission  or  notice  of 
protest  to  the  Comptroller  of  the  Currency,  retaining  a  copy 
therof.  If,  however,  satisfactory  proof  is  produced  to  the  notary 
public  that  the  payment  of  the  notes  demanded  is  restrained  by 
order  of  any  court  of  competent  jurisdiction,  he  shall  not  protest 
the  same.  When  the  holder  of  any  notes  causes  more  than  one 
note  or  package  to  be  protested  on  the  same  day,  he  shall  not  re- 
ceive pay  for  more  than  one  protest.     (Rev.  Stat.  U.  S.  Sec.  522G.) 

Redemption  After  Lawful  Money  Deposit. — It  is,  perhaps,  open  to 
dispute  whether  a  bank,  after  it  has  deposited  lawful  money  to  retire 
a  portion  of  its  circulation  under  the  act  of  June  20,  1874,  is  obliged  to 
redeem  its  notes  at  its  own  counter  until  the  deposit  of  lawful  money- 
is  exhausted  by  presentation  of  notes  at  the  Treasury.  In  other  words, 
it  is  held  by  some  that  while  lawful  money  remains  on  deposit  in  the 
Treasury  the  bank  might  refuse  to  redeem  a  note  presented  at  its  own 
counter,  and  refer  the  presentor  to  the  Treasury.  However  this  may 
be,  while  Section  5227  is  in  force,  a  bank  might  place  itself  in  a  very 
disagreeable  position,  and  perhaps  injure  its  credit,  by  refusing  to  re- 
deem any  of  its  notes  at  its  own  counter,  that  is,  so  long  as  it  continues 
a  going  bank. 

§  99.  Examination  by  Special  Agent — Forfeiture  of  Bonds. — 
On  receiving  notice  that  any  National  banking  association  has 
failed  to  redeem  any  of  its  circulating  notes,  as  specified  in  the  pre- 
ceding section,  the  Comptroller  of  the  Currency,  with  the  con- 
currence of  the  Secretary  of  the  Treasury,  may  appoint  a  special 
agent,  of  whose  appointment  immediate  notice  shall  be  given  to 
such  association,  who  shall  immediately  proceed  to  ascertain 
whether  it  has  refused  to  pay  its  circulating  notes  in  the  lawful 
money  of  the  United  States,  when  demanded,  and  shall  report  to 
the  Comptroller  the  fact  so  ascertained.  If  from  such  protest, 
and  the  report  so  made,  the  Comptroller  is  satisfied  that  such  asso- 
ciation has  refused  to  pay  its  circulating  notes  and  is  in  default,  he 
shall,  within  thirty  days  after  he  has  received  notice  of  such  fail- 
ure, declare  the  bonds  deposited  by  such  association  forfeited  to  the 
United  States,  and  they  shall  thereupon  be  so  forfeited.  (Rev. 
Stat.  U.  S.  Sec.  5227.) 


95 

§  100.  Bank  Not  to  Do  Business  After  Protest  of  Notes. —  After 
a  default  on  the  part  of  an  association  to  pay  any  of  its  circulating 
notes  has  been  ascertained  by  the  Comptroller,  and  notice  thereof 
has  been  given  by  him  to  the  association,  it  shall  not  be  lawful 
for  the  association  suffering  the  same  to  pay  out  any  of  its  notes, 
discount  any  notes  or  bills  or  otherwise  prosecute  the  business  of 
banking,  except  to  receive  and  safely  keep  money  belonging  to  it, 
and  to  deliver  special  deposits.  (Rev.  Stat.  U.  S.  Sec.  5228;  Act 
Feb.  18,  1875,  c.  80;  18  Stat.  L.,  320.) 

§  101.  Redemption  of  Notes  at  Treasury. — Immediately  upon 
declaring  the  bonds  of  an  association  forfeited  for  non-payment  of 
its  notes,  the  Comptroller  shall  give  notice,  in  such  manner  as  the 
Secretary  of  the  Treasury  shall,  by  general  rules  or  otherwise, 
direct,  to  the  holders  of  the  circulating  notes  of  such  association, 
to  present  them  for  payment  at  the  Treasury  of  the  United  States ; 
and  the  same  shall  be  paid  as  presented  in  lawful  money  of  the 
United  States;  whereupon  the  Comptroller  may,  in  his  discretion, 
cancel  an  amount  of  bonds  pledged  by  such  association  equal  at 
current  market  rates,  not  exceeding  par,  to  the  notes  paid.  (Rev. 
Stat.  U.  S.  Sec.  5229.) 

§  102.  Sale  of  Bonds — Lien  of  United  States  Upon  Assets. — 
Whenever  the  Comptroller  has  become  satisfied,  by  the  protest  or 
the  waiver  and  admission  specified  in  section  fifty-two  hundred 
and  twenty-six,  or  by  the  report  provided  for  in  section  fifty-two 
hundred  and  twenty-seven,  that  any  association  has  refused  to 
pay  its  circulating  notes,  he  may,  instead  of  cancelling  its  bonds, 
cause  so  much  of  them  as  may  be  necessary  to  redeem  its  outstand- 
ing notes  to  be  sold  at  public  auction  in  the  city  of  New  York, 
after  giving  thirty  days'  notice  of  such  sale  to  the  association. 
For  any  deficiency  in  the  proceeds  of  all  the  bonds  of  an  associa- 
tion, when  thus  sold,  to  reimburse  to  the  United  States  the  amount 
expended  in  paying  the  circulating  notes  of  the  association,  the 
United  States  shall  have  a  paramount  lien  upon  all  its  assets; 
and  such  deficiency  shall  be  made  good  out  of  such  assets  in 
preference  to  any  and  all  other  claims  whatsoever,   except  the 


90 

necessary  costs  and  expenses  of  administering  the  same.     (Rev. 
Stat.  U.  S.  Sec.  5230.) 

§  103.  Sale  of  Bonds  at  Private  Sale. — The  Comptroller  may, 
if  he  deems  it  for  the  interest  of  the  United  States,  sell  at  private 
sale  any  of  the  bonds  of  an  association  shown  to  have  made  default 
in  paying  its  notes,  and  receive  therefor  either  money  or  the  cir- 
culating notes  of  the  association.  But  no  such  bonds  shall  be  sold 
by  private  sale  for  less  than  par,  nor  for  less  than  the  market  value 
thereof  at  the  time  of  sale ;  and  no  sales  of  any  such  bonds,  either 
public  or  private,  shall  be  complete  until  the  transfer  of  the 
bonds  shall  have  been  made  with  the  formalities  prescribed  by  sec- 
tions fifty-one  hundred  and  sixty-two,  fifty-one  hundred  and  sixty- 
three,  and  fifty-one  hundred  and  sixty-four.  (Rev.  Stat.  U.  S. 
Sec.  5231.) 

§  104.  Expense  of  Transporting  and  Assorting  Notes — Cost  of 
Plates. — That  each  of  said  associations  shall  reimburse  to  the 
Treasury  the  charges  for  transportation  and  the  costs  for  assorting 
such  notes;  and  the  associations  hereafter  organized  shall  also 
severally  reimburse  to  the  Treasury  the  cost  of  engraving  such 
plates  as  shall  be  ordered  by  each  association  respectively;  and  the 
amount  assessed  upon  each  association  shall  be  in  proportion  to 
the  circulation  redeemed,  and  be  charged  to  the  fund  on  deposit 
with  the  Treasurer.  (Act  June  20,  1874,  Ch.  343,  Sec.  3;  18 
Stat.  L.,  124.) 

§  105.  Same  Subject. — 'That  the  National  banks  which  shall 
hereafter  make  deposits  of  lawful  money  for  the  retirement  in 
full  of  their  circulation  shall,  at  the  time  of  their  deposit,  be  as- 
sessed for  the  cost  of  transporting  and  redeeming  their  notes  then 
outstanding  a  sum  equal  to  the  average  cost  of  the  redemption  of 
National  bank  notes  during  the  preceding  year,  and  shall  there- 
upon pay  such  assessment;  and  all  National  banks  which  have 
heretofore  made,  or  shall  hereafter  make,  deposits  of  lawful  money 
for  the  reduction  of  their  circulation,  shall  be  assessed  and  shall 
pay  an  assessment  in  the  manner  specified  in  section  three  of  the 


97 

Act  approved  June  twentieth,  eighteen  hundred  and  seventy-four, 
for  the  cost  of  transporting  and  redeeming  their  notes  redeemed 
from  such  deposits  subsequently  to  June  thirtieth,  eighteen  hun- 
dred and  eighty-one.  (Act  July  12,  1882,  Ch.  290,  Sec.  8;  22 
Stat.  L.,  164.)* 

§  106.  Disposition  to  be  Made  of  Notes  Redeemed  by  Treasurer. 

— The  Secretary  of  the  Treasury  may,  from  time  to  time,  make 
such  regulations  respecting  the  disposition  to  be  made  of  circu- 
lating notes  after  presentation  at  the  Treasury  of  the  United 
States  for  payment,  and  respecting  the  perpetuation  of  the  evi- 
dence of  the  payment  thereof,  as  may  seem  to  him  proper.  (Rev. 
Stat.  IT.  S.  5232.) 

Notes  of  Failed  Banks. — This  section  was  originally  part  of  Section 
47  of  the  Act  of  June  3,  1864,  and  had  application  only  to  notes  of 
banks  in  default,  the  bonds  of  which  were  forfeited,  and  which  notes 
were  redeemed,  under  a  further  provision  of  the  same  Section  47  (now 
Section  5229,  Rev.  Stat.  U.  S.)   at  the  Treasury  of  the  United  States. 

Certificates  of  Destruction. — The  disposition  to  be  made  of  this 
particular  class  of  notes  is  left  to  the  discretion  of  the  Secretary  of 
the  Treasury.  If  Section  5232  as  it  now  stands  is  construed  to  apply 
solely  to  the  notes  of  banks  in  default  redeemed  at  the  Treasury,  then 
a  certificate  of  destruction  of  all  other  classes  of  notes  redeemed  at 
the  Treasury,  whether  of  banks  in  liquidation  or  of  banks  retiring  cir- 
culation, must  be  furnished  to  the  respective  associations  issuing  the 
notes,  as  the  mode  of  destruction  of  all  other  classes  of  notes  is  fixed 
in  the  various  sections  o'f  the  law  regarding  the  same.  (See  Section 
5225,  R.  S.  U.  S.;  Section  3  of  the  Act  of  June  20,  1874;  Sections  6 
•and  7  of  the  Act  of  July  12,  1882,  and  Section  5184,  Rev.  Stat.  U.  S. 
See  Sections  84,  89,  93  and  97.) 

§  107.  Cancellation  of  Notes. — All  notes  of  National  banking 
associations  presented  at  the  Treasury  of  the  United  States  fon 
payment  shall,  on  being  paid,  be  cancelled.  (Eev.  Stat.  U.  S. 
Sec.  5233.) 

*  This  section  should  be  read  in  connection  with  Section  9,  Act  of 
June  21,  1917,  Section  54  ante,  repealing  previous  requirements  that 
minimum  deposits  of  bonds  be  maintained  by  National  banks  with  the 
U.  S.  Treasurer. 

7 


98 

This  provision  is  modified  as  to  notes  fit  for  circulation  redeemed 
from  the  5  per  cent,  redemption  fund  by  the  Act  of  June  20,  1874,  Sec- 
tion 3,  which  permits  such  notes  to  be  returned  to  the  banks  for 
reissue. 

§  108.  Mode  of  Destruction. — For  the  maceration  of  National 
bank  notes,  United  States  notes,  and  other  obligations  of  the 
United  States  authorized  to  be  destroyed,  ten  thousand  dollars; 
and  that  all  such  issues  hereafter  destroyed  may  be  destroyed  by 
maceration  instead  of  burning  to  ashes,  as  now  provided  by  law; 
and  that  so  much  of  sections  twenty-four  and  forty-three  of  the 
National  Currency  Act  as  requires  National  bank  notes  to  be 
burned  to  ashes  is  hereby  repealed.  (Act  June  23,  1874,  Ch.  455, 
Sec.  1;  18  Stat.  L.,  20C.) 

By  Act  June  20,  1874,  Ch.  343,  Sec.  8  (18  Stat.  U.  S.,  124)  it  is  made 
the  duty  "of  the  Treasurer,  Assistant  Treasurers,  designated  deposit- 
aries, and  National  bank  depositaries  of  the  United  States,  *  *  to 
assort  and  return  to  the  Treasury,  for  redemption,  the  notes  of  such 
National  banks  as  have  failed,  or  gone  into  voluntary  liquidation,  for 
the  purpose  of  winding  up  their  affairs." 


CHAPTER  V. 
Regulation  of  the  Banking  Business. 

Section  109.  Place  of  Business. 

110.  Reserve  Cities — Central  Reserve  Cities. 

111.  Bank  Reserves. 

112.  Redemption  Fund  with  Treasurer  Not  Part  of  Re~ 

serve. 

113.  Limit  of  Liability  of  any  Person  to  Bank. 

114.  Limit  on  Total  Indebtedness  of  Banks — Exceptions. 

115.  Check    Not    to    be    Certified    Unless    Drawer    Has 

Amount  Thereof  on  Deposit. 

116.  Banks  Not  to  Lend  Upon  Their  Own  Stock. 

117.  Enforcing  Payment  of  Capital  Stock. 

118.  Withdrawal  of  Capital— Dividends— Bad  Debts. 

119.  Dividends  and  Surplus  Funds. 

120.  Circulating  Notes  Not  to  be  Hypothecated. 

121.  Each  Bank  to  Receive  Notes  of  Other  Banks. 

122.  Banks  Not  to  Pay  out  Uncurrent  Notes. 

123.  Stamping  Counterfeit  Notes. 

124.  List  of  Shareholders. 

125.  Rate  of  Interest  Which  Bank  May  Charge. 

126.  Penalty  for  Taking  Usurious  Interest. 

§  109.  Place  of  Business.— The  usual  business  of  each  National 
banking  association  shall  be  transacted  at  an  office  or  banking 
house  located  in  the  place  specified  in  its  organization  certificate. 
(Rev.  Stat.  U.  S.  Sec.  5190.) 

For  the  provision  authorizing  National  hanks  having  a  capital  and 
surplus  of  $1,000,000  or  more  to  establish  branches  in  foreign  coun- 
tries see  Sec.  25  of  the  Federal  Reserve  Act,  page  304. 

99 


100 

Place  of  Business. — This  provision  must  be  construed  reasonably; 
and  where  a  part  of  the  legitimate  business  of  the  bank  can  not  be 
transacted  at  the  banking-house  it  may  be  done  elsewhere.  (Mer- 
chants Nat.  Bank  v.  State  Nat.  Bank,  10  Wallace,  604.) 

Branch  Banks. — It  is  settled  beyond  doubt  that  a  National  bank, 
independently  of  the  National  Bank  Act,  is  not  under  its  charter 
authorized  to  establish  a  branch  bank  for  the  purpose  of  carrying  on 
a  general  banking  business  in  the  place  designated  in  its  certificate 
of  organization  or  anywhere  in  the  United  States,  and  furthermore, 
that  Section  5190,  U.  S.  R.  S.,  properly  construed,  restricts  the  carrying 
on  of  a  general  banking  business  by  a  National  bank  to  one  office  or 
banking  house  in  the  place  designated  in  the  association  certificate  of 
organization,  except  in  so  far  as  that  section  is  amended  by  Section  25 
of  the  Federal  Reserve  Act,  as  amended,  which  permits  foreign 
branches  under  certain  conditions.  (See  opinion  of  Attorney-General 
regarding  Lowry  National  Bank  of  Atlanta,  Georgia,  29  Op.  A.  G.,  81.) 
And  the  Solicitor  of  the  Treasury  in  an  opinion  rendered  July  25,  1910, 
held  that  a  National  bank  could  not  establish  a  branch  or  agency  for 
the  purpose  of  receiving  deposits  and  cashing  checks.  See  also  Arm- 
strong v.  Second  National  Bank  (38  Fed.  Rep.,  883.) 

Agencies. — 'There  is  a  clear  distinction  between  a  branch  bank  and 
an  agency.  (29  Op.  Atty.  Gen.,  81.)  A  National  bank  may  establish  an 
agency  for  a  specific  purpose  such  as  dealing  in  bills  of  exchange. 
(Bank  of  Augusta  v.  Earle,  13  Pet,  519;  Bank  v.  Beach,  Fed.  Case  No. 
2736.) 

§  110.  Reserve  Cities — Central  Reserve  Cities. — The  power  to 
designate  Reserve  and  Central  Reserve  cities  is  now  vested  in  the 
Federal  Reserve  Board,  see  section  11  (e)  of  Federal  Reserve  Act, 
page  230,  and  note  thereto  for  a  list  of  the  Reserve  and  Central 
Reserve  cities. 

§  111.  Bank  Reserves. —  (This  subject  is  now  governed  Ivy  Sec- 
tion 19  of  the  Federal  Reserve  Act.    See  page  294  ff.) 

§  112.  Redemption  Fund  with  Treasurer  Not  Part  of  Reserve. 

—  (Sections  two  and  three  of  the  Act  of  June  20,  1874,  which  pro- 
vided that  the  redemption  fund  deposited  with  the  Treasurer 
might  be  counted  as  a  part  of  the  reserve  was  repealed  by  Section 
20  of  the  Federal  Reserve  Act.    See  page  300.) 


101 

§  113.  Limit  of  Liability  of  Any  Person  to  Bank. —  The  total 
liabilities  to  any  association  of  any  person  or  of  any  company,  cor- 
poration, or  firm  for  money  borrowed,  including  in  the  liabilities 
of  a  company  or  firm  the  liabilities  of  the  several  members  thereof, 
shall  at  no  time  exceed  10  per  centum  of  the  amount  of  the  capital 
stock  of  such  association,  actually  paid  in  and  unimpaired,  and 
10  per  centum  of  its  unimpaired  surplus  fund:  Provided,  how- 
ever, That  (1)  the  discount  of  bills  of  exchange  drawn  in  good 
faith  against  actually  existing  values,  including  drafts  and  bills  of 
exchange  secured  by  shipping  documents  conveying  or  securing 
title  to  goods  shipped,  and  including  demand  obligations  when  se- 
cured by  documents  covering  commodities  in  actual  process  of  ship- 
ment, and  also  including  bankers'  acceptances  of  the  kinds  de- 
scribed in  Section  13  of  the  Federal  Eeserve  Act,  (2)  the  dis- 
count of  commercial  or  business  paper  actually  owned  by  the  per- 
son, company,  corporation,  or  firm  negotiating  the  same,  (3)  the 
discount  of  notes  secured  by  shipping  documents,  warehouse  re- 
ceipts, or  other  such  documents  conveying  or  securing  title  cover- 
ing readily  marketable  nonperishable  staples,  including  live  stock, 
when  the  actual  market  value  of  the  property  securing  the  obliga- 
tion is  not  at  any  time  less  than  115  per  centum  of  the  face 
amount  of  the  notes  secured  by  such  documents  and  when  such 
property  is  fully  covered  by  insurance,  and  (1)  the  discount  of 
any  note  or  notes  secured  by  not  less  than  a  like  face  amount  of 
bonds  or  notes  of  the  United  States  issued  since  April  24,  1917, 
or  certificates  of  indebtedness  of  the  United  States,  shall  not  be 
considered  as  money  borrowed  within  the  meaning  of  this  section. 
The  total  liabilities  to  any  association,  of  any  person  or  of  any  cor- 
poration, or  firm,  or  company,  or  the  several  members  thereof 
upon  any  note  or  notes  purchased  or  discounted  by  such  associa- 
tion and  secured  by  bonds,  notes,  or  certificates  of  indebtedness 
as  described  in  (4)  hereof  shall  not  exceed  (except  to  the  extent 
permitted  by  rules  and  regulations  prescribed  by  the  Comptroller 
of  the  Currency,  with  the  approval  of  the  Secretary  of  the  Treas- 
ury) 10  per  centum  of  such  capital  stock  and  surplus  fund  of 
such  association  and  the  total  liabilities  to  any  association  of  any 
person  or  of  any  corporation,  or  firm,  or  company,  or  the  several 


103 

members  thereof  for  money  borrowed,  including  the  liabilities  upon 
notes  secured  in  the  manner  described  under  (3)  hereof,  except 
transactions  (1),  (2),  and  (4),  shall  not  at  any  time  exceed  25 
per  centum  of  the  amount  of  the  association's  paid-in  and  unim- 
paired capital  stock  and  surplus.  The  exception  made  under  (3) 
hereof  shall  not  apply  to  the  notes  of  any  one  person,  corporation 
or  firm  or  company,  or  the  several  members  thereof  for  more  than 
six  months  in  any  consecutive  twelve  months.  (Rev.  Stat.  U.  S. 
Sec.  5200,  as  amended  by  Act  Jan.  22,  1906 ;  by  Sec.  6,  Act  Sept. 
24,  1918,  and  by  Sec.  1,  Act  Oct.  22,  1919.) 

CIRCULAR  OF  THE  COMPTROLLER  OF  THE  CURRENCY 
OF  OCTOBER  25,  1919. 

Loaning  Powebs  of  National  Banks  Under  the  Amendment  to  Section 
5200,  U.  S.  R.  S.,  Which  Became  Effective  October  22,  1919. 

(Section  5200  as  set  out  above  Is  omitted  to  avoid  repetition.) 
The  amounts  which,  a  National  bank  may  properly  lend  to  any  one 
person,  company,  corporation,  or  firm  (including  in  the  liability  of  a 
company  or  firm,  the  liabilities  of  the  several  members  thereof)  under 
the  various  clauses  of  Section  5200,  as  amended  by  the  Act  of  October 
22,  1919,  are  stated  in  terms  of  the  percentage  of  the  paid-up  and  un- 
impaired capital  stock  and  surplus  of  the  lending  bank 

Character  of  loans. 

(A)  Accommodation  or  straight  loans,  whether  or  not  single  name. 
Loans  secured  by  stocks,  bonds,  and  authorized  real  estate  mort- 
gages. 

(B)  "Bills  of  exchange  drawn  in  good  faith  against  actually  existing 

values." 
The  law  expressly  provides  that  this  phrase  shall  also  include: 

(a)  Drafts  and  bills  of  exchange  secured  by  shipping  documents 

conveying  or  securing  title  to  the  goods  shipped. 

(b)  Demand  obligations,  when  secured  by  documents  covering 

commodities  in  actual  process  of  shipment. 

(c)  Bankers'  acceptances  of  the  kinds  described  in  Section  13 

of  the  Federal  Reserve  Act. 

(C)  Commercial  or  business  paper  (of  other  makers)  actually  owned 

by  the   person,   company,   corporation,  or   firm    negotiating  the 
same. 


103 

(D)  Notes   secured   by   shipping    documents,    warehouse    receipts,   or 

other  such  documents,  conveying  or  securing  title  covering  read- 
ily marketable  nonperishable  staples,  including  live  stock. 
No  bank  may  make  any  loan  under  (D),  however, 

(a)  Unless  the  actual  market  value  of  the  property  securing  the 

obligation  is  not  at  any  time  less  than  115  per  cent,  of 
the  face  amount  of  the  note,  and 

(b)  Unless  the  property  is  fully  covered  by  insurance,  and  in 

no  event  shall  the  privilege  afforded  by  (D)  be  exercised 
for  any  one  customer  for  more  than  six  months  in  any 
consecutive  twelve  months. 

(E)  Notes  secured  by  not  less  than  a  like  face  amount  of  bonds  or 

notes  of  the  United  States  issued  since  April  24,  1917,  or  by 
certificates  of  indebtedness  of  the  United  States. 

(F)  Notes  secured  by  United   States  Government  obligations  of  the 

kinds  described  under  (E),  the  face  amount  of  which  is  at  least 
equal  to  105  per  cent,  of  the  amount  of  the  customer's  notes. 

Amounts  loanable. 

(A)  Maximum  limit,  10  per  cent,  of  bank's  paid-up  and  unimpaired 

capital  and  surplus. 

(B)  No  limit  imposed  by  law. 

(C)  No  limit  imposed  by  law. 

(D)  Fifteen  per  cent,  of  bank's  capital  and  surplus,  in  addition  to  the 

amount  allowed  under  (A) ;  or  if  the  full  amount  allowed  under 
(A)  is  not  loaned,  then  the  amOunt  which  may  be  loaned  in  the 
manner  described  under  (D)  is  increased  by  the  loanable  amount 
not  used  under  (A).  In  other  words,  the  amount  loaned  under 
(A)  must  never  be  more  than  10  per  cent.,  but  the  aggregate 
of  (A)   and  (D)  may  equal,  but  not  exceed,  25  per  cent. 

(E)  Ten  per  cent,  of  bank's  capital  and  surplus,  in  addition  to  the 

amount  allowed  under  (A),  or  if  the  full  amount  allowed  under 
(A)  is  not  loaned,  then  the  amount  which  may  be  loaned  in  the 
manner  described  under  (E)  is  increased  by  the  loanable  amount 
not  used  under  (A).  In  other  words,  the  amount  loaned  under 
(A)  must  never  be  more  than  10  per  cent.,  but  the  aggregate  of 
(A)  and  (E)   may  equal,  but  not  exceed,  20  per  cent. 


104 

(F)  No  limit,  but  this  privilege,  under  regulations  of  the  Comptroller 
of  the  Currency,  expires  December  31,  1920. 

Some  examples  of  what  a  National  bank  may  lend  at  any  one  time  to 
any  one  customer  under  the  amendment  to  Section  5200,  of 
October  22,  1919,  expressed  in  terms  of  percentage  of  the  bank's 
capital  and  surplus. 

Ex.  1  Ex.  2  Ex.  3  Ex.4 

(A)  Accommodation  or  straight  loans,  or  loans 

secured  by  shares  of  stock,  bonds,  or  au- 
thorized real  estate  mortgages 10%       5%       5%      0 

(D)  Notes  secured  by  warehouse  receipts,  etc...  15%    20%     15%     25% 

(E)  Notes  secured   by  a  like  face  amount   of 

Government  obligations 10%     10%     15%     10% 

Total 35%     35%     35%     35% 

(B)  Bills  of  exchange  drawn  against  actually 

existing   values No  limit  imposed  by  law. 

(C)  Commercial  or  business  paper Do. 

(F)  Notes  secured  by  at  least  105  per  cent,  of 

United  States  Government  obligations . . .         Do. 

The  time  within  which  loans  secured  by  Government  obligations  may 
be  granted  in  excess  of  10  per  cent,  of  the  capital  and  surplus  has  been 
extended  from  January  1,  1920,  to  December  31,  1920. 

Section  5202,  as  amended  by  the  Act  effective  October  22,  1919,  per- 
mits a  National  bank  to  be  liable  without  limit  as  indorser  on  accepted 
bills  of  exchange  payable  abroad  actually  owned  by  the  indorsing  bank 
and  discounted  at  home  or  abroad. 

The  Comptroller  rules  that  the  surplus  of  a  National  bank  referred 
to  above  does  not  include  "undivided  profits,"  and  that  therefore  the 
latter  can  not  be  included  as  a  basis  for  loans  unless  carried  to  the 
surplus  fund  by  a  vote  of  the  Directors. 

Intent  of  Restriction. — The  general  purpose  of  this  section  is  ob- 
vious. It  is  to  prohibit  any  bank  from  hazarding  a  large  amount  of  its 
funds  in  loans  to  any  one  person,  and  to  require  such  a  distribution  of 
the  risks  among  a  large  number  of  persons  that  the  failure  of  any  one 
or  two  customers  will  not  so  seriously  involve  the  bank  as  to  endanger 
its  solvency.  But  the  transactions  of  the  banks  would  be  unduly  ham- 
pered if  this  rule  applied  in  the  case  of  all  discounts,  and  so  greater 
latitude  is  permitted  in  certain  cases  and  no  limitations  imposed  in 
others. 


105 

When  Applicable. — Numerous  questions  arise  under  this  section 
which  cause  bank  officers  much  perplexity.  The  question  that  should 
always  be  answered  is,  who  is  the  borrower?  i.  e.,  Who  procured 
the  money  from  the  bank?  The  liabilities  of  a  person  to  a  bank  as 
indorser,  guarantor  or  surety  should  not  be  considered  in  computing 
the  ten  per  cent,  limit  unless  such  person  actually  negotiated  the 
loan  with  the  bank  and  received  the  proceeds  derived  therefrom.  The 
Comptroller  of  the  Currency  holds  that  the  liabilities  of  an  accom- 
modation maker  should  be  included  in  estimating  the  ten  per  cent, 
limit.  The  legality  of  this  position,  however,  is  doubtful  as  such  maker 
incurs  the  liability  for  the  accommodation  of  another  and,  as  he  does 
not  receive  the  proceeds,  would  not  seem  to  be  the  borrower. 

But  it  is  to  be  remembered  that  the  question,  who  is  the  borrower? 
is  not  always  to  be  determined  from  the  positions  of  the  parties  as 
they  appear  on  the  paper.  The  borrower  may  be  the  maker,  or  he  may 
be  an  indorser.  It  is  the  person  who  negotiates  the  paper  with  the 
bank,  who  procures  the  money  upon  it,  that  is  the  borrower,  irrespec- 
tive of  whether  he  appears  thereon  as  indorser  or  guarantor  or  maker. 

Another  question  which  often  arises  is,  When  one  person  is  a  partner 
in  two  firms,  will  a  loan  of  the  maximum  amount  to  one  of  these  firms 
preclude  a  loan  to  the  other  firm?  The  Comptroller  of  the  Currency 
holds  that  the  liability  of  the  common  partner  is  to  be  deemed  the 
liability  of  each  of  the  two  firms.  But  as  to  the  correctness  of  this 
ruling  there  may  be  some  doubt.  It  is  the  individual  indebtedness  of 
the  different  parties  which  is  mentioned  in  the  statute.  Nothing 
is  said  about  including  the  liabilities  of  any  other  partnership,  nor  is 
such  an  intention  necessarily  to  be  inferred.  As  each  partner  is  liable 
for  all  the  debts  of  the  firm,  it  is  reasonable  that  his  individual  lia- 
bility to  the  bank  should  be  included  in  the  liabilities  of  the  partner- 
ship; but  the  fact  that  there  is  a  common  partner  will  no't  make  one 
partnership  liable  for  the  debts  of  the  other,  and  there  would,  there- 
fore, be  no  reason  why  the  liabilities  of  one  firm  should  affect  the  right 
of  the  bank  to  make  loans  to  the  other  firm. 

State  Bank  With  Branches  Converted  Into  National. — 'There  is  no 
restriction  of  law  prohibiting  the  Comptroller  of  the  Currency  from 
permitting  a  National  bank,  having  a  lawfully  established  branch,  to 
make  loans  at  either  place,  based  on  the  total  amount  of  the  capi- 
talization and  surplus  of  the  corporation.  The  only  restriction  in  law 
in  that  respect  is  that  the  aggregate  loans  made  by  the  mother  bank 
and  all  of  its  branches  shall  not  at  any  one  time  exceed  the  limitations 
expressed  in  Section  5200  Revised  Statues,  as  amended.  (27  Op.  Atty. 
Gen.,  601.) 


106 

Penalty. — The  only  penalty  for  violation  of  this  section  is  the  lia- 
bility which  the  bank  incurs  of  a  forfeiture  of  its  franchises,  as  pre- 
scribed in  Sec.  5239,  Rev.  Stat.  U.  S.,  and  though  the  loan  is  in  excess 
of  the  amount  here  prescribed,  the  bank  can  recover  the  full  amount 
from  the  borrower.  (Gold  Mining  Company  v.  Rocky  Mountain  Nat. 
Bank,  96  U.  S.,  640;  Corcoran  v.  Batch  elder,  147  Mass.,  541.  O'Hare  v. 
Second  Nat.  Bank  of  Titusville,  77  Pa.  St.,  96;  Wyman  v.  Citizens'  Nat. 
Bank  of  Faribault,  29  Fed.  Rep.,  734;  Smith  v.  First  Nat.  Bank,  45 
Neb.,  444.)  And  a  court  of  equity  will  not  enjoin  the  bank  from  trans- 
ferring to  innocent  third  persons  notes  and  securities,  on  the  ground 
that  the  notes  represent  part  of  a  loan  made  in  excess  of  10  per  cent, 
of  the  capital  of  the  bank.  (Elder  v.  First  Nat.  Bank  of  Ottawa,  12 
Kans.,  238.)  Where  a  State  bank  loans  to  one  person  an  amount  in 
excess  of  one-tenth  of  its  capital,  and  is  afterwards  converted  into  a 
National  bank,  it  may,  after  conversion,  extend  tlie  time  for  payment 
without  violating  this  section.  (Allen  v.  First  Nat.  Bank  of  Xenia,  23 
Ohio  St.,  97.)  A  chattel  mortgage  is  not  void  because  the  advances 
made  exceed  one-tenth  of  the  capital  of  the  bank.  (The  Seattle,  170 
Fed.  Rep.,  284.) 

Bills  of  Exchange  Drawn  in  Good  Faith  Against  Actually  Ex- 
isting Values. — In  determining  whether  a  certain  transaction  amounts 
to  a  discount  of  such  paper  or  should  be  deemed  a  loan  within  the 
10  per  cent,  limitation,  the  substance  rather  than  the  form  of  the 
transaction  is  the  test.  Consequently,  bills  secured  by  shipping  docu- 
ments, or  by  the  pledge  of  goods  actually  sold,  may  be  discounted  by 
member  banks,  before  acceptance,  without  limitation  as  far  as  this 
section  is  concerned.  If,  however,  such  a  bill  should  first  be  accepted 
by  the  drawee  who  then  discounts  it  with  a  member  bank,  the  transac- 
tion would  be  subject  to  the  limitations  imposed  by  the  section, 
though  the  paper  is  in  the  form  of  commercial  or  business  paper.  As 
a  matter  of  fact,  however,  the  latter  transaction  is  a  straight  loan. 
The  acceptance  of  the  bill  by  the  drawee  discharges  the  drawer  and 
while  the  instrument  remains  a  bill  of  exchange  in  form,  it  ceases  to 
be  such  in  fact.  The  obligation  of  the  drawee  is  now  primary,  whereas 
prior  to  his  acceptance  it  was  secondary  or  collateral,  and  where  the 
bank  discounts  the  accepted  paper  it  is  in  effect  making  a  direct  loan 
to  the  drawee  on  his  own  obligation. 

So  also  where  a  bank  purchases  its  own  acceptance  under  authority 
of  Section  13  of  the  Federal  Reserve  Act,  it  is  in  effect  merely  using 
its  funds  to  anticipate  the  payment  of  a  liability  which  its  customer 
has  agreed  to  pay  at  a  later  day  and  even  though  the  bill  were  secured 
by  shipping  documents,  etc.,  the  security  is  only  collateral,  and  the 
bank  has  made  a  loan  of  its  funds  to  its  customer  and  the  loan  is  sub- 


107 

ject  to  the  limitations  of  the  section.     (Opinion  of  Counsel  of  Board, 
Dec.  1,  1916.) 

Commercial  or  Business  Paper. — If  for  any  reason  it  is  not  deemed 
practicable  to  discount  bills  of  exchange  as  indicated,  advances  may 
be  made  on  "commercial  or  business  paper"  by  banks  discounting  the 
notes  given  in  payment  for  cotton,  grain,  or  other  products.  Instead 
of  advancing  money  in  excess  of  the  limit  to  any  party  for  the  pur- 
chase of  cotton,  grain,  etc.,  the  purchaser  should  be  required  to  give 
his  notes  in  payment  for  the  commodity  to  the  dealers  from  whom  it 
is  purchased,  and  such  notes  may  be  discounted  for  the  dealers  when 
indorsed  by  them  and  accompanied  by  warehouse  receipts  assigned 
to  the  bank.  This  would  be  practically  an  advance  to  the  purchaser, 
and  at  the  same  time  come  within  the  exception  relative  to  the  dis- 
count of  commercial  or  business  paper. 

There  would  seem  to  be  no  good  reason  why  the  dealers  should  re- 
fuse to  indorse  such  notes  as  the  bank  would  hold  the  warehouse 
receipts  until  the  purchaser  paid  his  notes,  which  he  could  do  by 
drawing  a  bill  of  exchange  when  ready  to  make  a  shipment. 

These  transactions  should  not  be  confused  with  the  purchase  or 
discount  of  a  bank's  own  acceptance.  In  the  latter  case  the  bank 
has  actually  utilized  its  own  funds  in  purchasing  the  rights  of  the 
holder  of  the  acceptance.  But  where  a  bank  accepts  a  draft  drawn 
against  it  and  this  acceptance  is  discounted  with  a  third  party,  the 
customer  procuring  the  acceptance  has  not  borrowed  the  money,  but 
only  the  credit,  of  the  accepting  bank  and  the  limitations  of  the 
section  does  not  apply  to  the  bank  in  so  dealing  with  the  customer. 
So  also  when  a  bill  of  exchange  has  been  accepted  by  the  drawee,  and 
the  shipping  documents  have  been  removed,  though  the  direct  obliga- 
tion of  the  drawee  to  pay  such  bill  at  maturity  may  be  said  to  be 
substituted  for  the  "actual  value"  against  which  the  bill  was  originally 
drawn,  nevertheless,  when  discounted  by  a  bona  fide  owner  for  value, 
its  discount  would  not  be  subject  to  the  limitations  of  the  section, 
since  it  would  still  come  within  the  classification  of  "commercial  or 
business  paper  actually  owned  by  the  person  negotiating  the  same." 
(Opinion  of  Counsel  of  Board,  Dec.  1,  191G.) 

§  114.  Limitation  on  Total  Indebtedness  of  National  Banks — 
Exceptions. —  No  National  banking  association  shall  at  any  timd 
be  indebted,  or  in  any  way  liable,  to  an  amount  exceeding  the 
amount  of  its  capital  stock  at  such  time  actually  paid  in  and 


108 

remaining  undiminished  by  losses  or  otherwise,  except  on  account 
of  demands  of  the  nature  following: 

First.   Notes  of  circulation. 

Second.    Moneys  deposited  with  or  collected  by  the  association. 

Third.  Bills  of  exchange  or  drafts  drawn  against  money  actually 
on  deposit  to  the  credit  of  the  association,  or  due  thereto. 

Fourth.  Liabilities  to  the  stockholders  of  the  association  for 
dividends  and  reserve  profits. 

Fifth.  Liabilities  incurred  under  the  provisions  of  the  Federal 
Eeserve  Act. 

Sixth.  Liabilities  incurred  under  the  provisions  of  the  War 
Finance  Corporation  Act. 

Seventh.  Liabilities  created  by  the  indorsement  of  accepted  bills 
of  exchange  payable  abroad  actually  owned  by  the  indorsing  bank 
and  discounted  at  home  or  abroad.  (Rev.  Stat.  U.  S.  Sec.  5202, 
as  amended  by  Sec.  13,  Act  Dec.  23,  1913;  Act  Sept.  7,  1916; 
Sec.  20,  Act  April  5,  1918,  and  Sec.  2,  Act  Oct.  22,  1919.) 

A  National  bank  may  become  indebted  upon  any  contract  within  the 
scope  of  its  powers  to  the  full  amount  of  its  capital  stock  then  actually 
paid  in,  notwithstanding  that  it  has  notes  of  circulation,  deposits, 
special  funds  subject  to  draft,  or  funds  for  the  payment  of  declared 
dividends  to  stockholders,  which  either  alone  or  in  the  aggregate  equal 
its  paid-in  capital  stock.  (Weber  v.  Spokane  Nat.  Bank,  64  Fed.  Rep., 
208.)  The  fact  that  an  indebtedness  of  a  National  bank  was  incurred 
in  violation  of  Rev.  Stat.  U.  S.,  5202,  is  no  defense  to  the  bank  or  its 
receiver.  (Id.  reversing  the  decision  of  the  United  States  Circuit 
Court  in  the  same  case.    See  50  Fed.  Rep.,  735.) 

§  115.  Checks  Not  to  be  Certified  Unless  Drawer  Has  Amount 
Thereof  on  Deposit. — It  shall  be  unlawful  for  any  officer,  director, 
agent,  or  employee  of  any  Federal  reserve  bank,  or  of  any  mem- 
ber bank  as  defined  in  the  Act  of  December  twenty-third,  nine- 
teen hundred  and  thirteen,  known  as  the  Federal  Eeserve  Act, 
to  certify  any  check  drawn  upon  such  Federal  reserve  bank  or 
member  bank  unless  the  person,  firm,  or  corporation  drawing 
the  check  has  on  deposit  with  such  Federal  reserve  bank  or  mem- 
ber bank,  at  the  times  such  check  is  certified,  an  amount  of 
money  not  less  than  the  amount  specified  in  such  check.     Any 


109 

check  so  certified  by  a  duly  authorized  officer,  director,  agent, 
or  employee  shall  be  a  good  and  valid  obligation  against  such 
Federal  reserve  bank  or  member  bank;  but  the  act  of  any  officer, 
director,  agent,  or  employee  of  any  such  Federal  reserve  bank 
or  member  bank  in  violation  of  this  section  shall,  in  the  discre- 
tion of  the  Federal  Reserve  Board,  subject  such  Federal  reserve 
bank  to  the  penalties  imposed  by  section  eleven,  subsection  (h), 
of  the  Federal  Eeserve  Act,  and  shall  subject  such  member  bank 
if  a  national  bank  to  the  liabilities  and  proceedings  on  the  part 
of  the  Comptroller  of  the  Currency  provided  for  in  section  fifty- 
two  hundred  and  thirty-four,  Eevised  Statutes,  and  shall,  in  the 
discretion  of  the  Federal  Eeserve  Board,  subject  any  other  mem- 
ber bank  to  the  penalties  imposed  by  section  nine  of  said  Federal 
Eeserve  Act  for  the  violation  of  any  of  the  provisions  of  said  Act. 
(Eev.  Stat.  U.  S.  Sec.  5208,  as  amended  by  Act  Sept.  26,  1918.) 

Liability  for  Certification. — The  bank  will  be  liable  upon  the  cer- 
tification, though  it  is  made  in  violation  of  this  section.  (Thompson 
v.  St.  Nicholas  Nat.  Bank,  146  U.  S.f  240,  s.  c.  113  N.  Y.,  325.)  See 
also  United  States  v.  Heinze,  161  Fed.  Rep.,  425. 

§  116.  Banks  Not  to  Lend  Upon  Their  Own  Stock. — No  asso- 
ciation shall  make  any  loan  or  discount  on  the  security  of  the 
shares  of  its  own  capital  stock,  nor  be  the  purchaser  or  holder  of 
any  such  shares,  unless  such  security  or  purchase  shall  be  neces- 
sary to  prevent  loss  upon  a  debt  previously  contracted  in  good 
faith ;  and  stock  so  purchased  or  acquired  shall,  within  six  months 
from  the  time  of  its  purchase,  be  sold  or  disposed  of  at  public  or 
private  sale;  or,  in  default  thereof,  a  receiver  may  be  appointed  to 
close  up  the  business  of  the  association,  according  to  section  fifty- 
two  hundred  and  thirty-four.    (Eev.  Stat.  U.  S.  Sec.  5201.) 

Bank  Can  Not  Acquire  Lten. — A  National  bank  can  not  acquire  a 
lien  on  its  own  stock  in  the  hands  of  its  stockholders,  and  any  pro- 
vision in  the  articles  of  association  or  by-laws,  or  in  the  certificates 
of  stock  prohibiting  a  transfer  until  the  liability  of  the  stockholder 
to  the  bank  is  paid,  is  wholly  void.  (Bank  v.  Lanier,  11  Wall.,  369; 
Bullard  v.  National  Bank,  18  Wall.,  589;  Third  Nat.  Bank  v.  Buffalo 
German  Ins.  Co.,  193  U.  S.,  581;  s.  c,  162  N.  Y.,  163.)  A  provision  of 
this  character  in  the  certificate  of  stock  does  not  affect  the  rights  of 


110 

a  transferee,  or  operate  as  notice  to  him,  since  the  provision  is  wholly 
void.  (Third  Nat.  Bank  v.  Buffalo  German  Insurance  Company,  193 
U.  S.,  581.)  But  when  a  stockholder  has  pledged  his  stock  to  the 
bank,  he  can  dispute  the  validity  of  such  pledge  only  while  the  con- 
tract is  executory,  and  the  security  still  subsists  in  the  possession  of 
the  bank;  if  the  stock  has  been  sold,  and  the  proceeds  applied  to  the 
payment  of  the  debt,  the  court  will  not  aid  him  to  recover  the  value 
of  his  stock.  (National  Bank  of  Xenia  v.  Stewart,  107  U.  S.,  676.) 
Where  a  bank  takes  a  pledge  of  its  own  stock  to  secure  a  deposit  made 
with  another  bank,  this  is  a  lending  upon  the  security  of  its  stock 
within  the  meaning  of  this  section.  (Bank  v.  Lanier,  11  Wall.,  369.) 
So  this  section  forbids  the  bank  to  hold  the  stock  of  the  shareholder 
to  secure  an  indebtedness  due  from  him  to  it  on  account  of  collections 
made  for  its  account.  (Conklin  v.  Second  Nat.  Bank,  45  N.  Y.,  655.) 
But  this  section  will  not  prevent  a  bank  from  holding  a  cash  dividend 
as  pledged  for  the  indebtedness  of  the  shareholder  to  the  bank.  (Hager 
v.  Union  Nat.  Bank,  63  Me.,  59.)  Nor  does  it  forbid  the  shares  of  the 
stockholder  to  be  attached  for  his  indebtedness  to  the  bank.  (Id.) 

Purchase  Not  Void,  But  Only  Voidable. — Inasmuch  as  no  penalty 
is  imposed  either  upon  the  bank  or  the  borrower  for  a  violation  of 
this  section,  such  violation  may  not  be  urged  against  the  validity  of 
the  transaction  by  any  one  except  the  Government,  at  least  unless  the 
objection  was  made  before  the  contract  was  executed  or  while  the 
security  was  in  the  hands  of  the  bank.  (Walden  Nat.  Bank  v.  Birch, 
130  N.  Y.,  221.)  Nor  is  the  statute  available  as  a  defense  to  one  who 
has  bought  the  stock  of  the  bank,  when  sued  by  the  receiver  for  an 
assessment  upon  the  same.  (Lantry  v.  Wallace,  182  U.  S.,  536;  Burrows 
v.  Niblock,  84  Fed.  Rep.,  111.) 

Bank  May  Transfer  Title. — As  a  loan  made  by  a  National  bank 
upon  the  security  of  its  own  stock  is  not  void,  but  only  voidable,  the 
bank  upon  being  compelled  to  take  the  stock,  may  transfer  a  good 
title  to  the  purchaser.  (Barron  v.  McKinnon,  196  Fed.  Rep.,  933;  First 
Nat.  Bank  v.  Lanz,  202.  Fed.  Rep.,  117.) 

Purchase  and  Sale  By  Officers  of  Bank. — The  sale  by  an  officer 
to  himself  of  the  stock  of  the  bank  owned  by  the  bank  may  be  ratified 
by  the  bank  or  its  legal  representative;  but  a  sale  by  himself  to  the 
bank  of  its  own  stock,  where  he  acts  in  the  double  capacity  of  seller 
and  buyer,  cannot  be  ratified  when  the  purchase  of  the  stock  by  the 
bank  is  not  necessary  to  prevent  loss  upon  a  debt  previously  con- 
tracted. (Bundy  v.  Jackson,  24  Fed.  Rep.,  1628.)  And  where  a  Na- 
tional bank  purchased  shares  of  its  own  stock,  and  divided  them 
among  its  directors,  the  transaction  was  held  void,  and  the  directors 


Ill 

to  have  acquired  no  title.     (Meyers  v.  Valley  Nat.  Bank,  Fed.  Case  No. 
9519.) 


Stock  of  Othek  National  Bank. — This  section  does  not  forbid  a 
National  bank  to  make  a  lo'an  upon  the  security  of  the  stock  of  an- 
other National  bank.  (National  Bank  v.  Case,  96  U.  S.,  628.)  But  it 
may  not  purchase  such  stock  on  speculation.  (Metropolitan  Trust 
Company  v.  McKinnon,  172  Fed.  Rep.,  846.) 


§  117.  Enforcing  Payment  of  Capital  Stock. — Every  associa- 
tion which  shall  have  failed  to  pay  up  its  capital  stock,  as  required 
by  law,  and  every  association  whose  capital  stock  shall  have  become 
impaired  by  losses  or  otherwise,  shall,  within  three  months  after 
receiving  notice  thereof  from  the  Comptroller  of  the  Currency,  pay 
the  deficiency  in  the  capital  stock,  by  assessment  upon  the  share- 
holders pro  rata  for  the  amount  of  capital  stock  held  by  each; 
and  the  Treasurer  of  the  United  States  shall  withhold  the  interest 
upon  all  bonds  held  by  him  in  trust  for  any  such  association,  upon 
notification  from  the  Comptroller  of  the  Currency,  until  other- 
wise notified  by  him.  If  any  such  association  shall  fail  to  pay  up 
its  capital  stock,  and  shall  refuse  to  go  into  liquidation,  as  pro- 
vided by  law,  for  three  months  after  receiving  notice  from  the 
Comptroller,  a  receiver  may  be  appointed  to  close  up  the  business 
of  the  association,  according  to  the  provisions  of  section  fifty-two 
hundred  and  thirty-four.  And  provided,  That  if  any  shareholder 
or  shareholders  of  such  bank  shall  neglect  or  refuse,  after  three 
months'  notice,  to  pay  the  assessment,  as  provided  in  this  section, 
it  shall  be  the  duty  of  the  board  of  directors  to  cause  a  sufficient 
amount  of  the  capital  stock  of  such  shareholder  or  shareholders  to 
be  sold  at  public  auction  (after  thirty  days'  notice  shall  be  given 
by  posting  such  notice  of  sale  in  the  office  of  the  bank,  and  by 
publishing  such  notice  in  a  newspaper  of  the  city  or  town  in 
which  the  bank  is  located,  or  in  a  newspaper  published  nearest 
thereto),  to  make  good  the  deficiency;  and  the  balance,  if  any, 
shall  be  returned  to  such  delinquent  shareholder  or  shareholders. 
(Rev.  Stat.  U.  S.  5205,  as  amended  by  Act  June  30,  1876,  Ch. 
156,  Sec.  4;  19  Stat.  L.,  64.) 


112 

Decision  of  the  Comptroller  Conclusive. — The  decision  of  the 
Comptroller  that  the  capital  is  impaired  is  conclusive.  (Thomas  v. 
Gilbert,  101  Pac.  Rep.  (Oregon),  393.)  The  Comptroller  has  discre- 
tionary power  to  withdraw  an  assessment  on  shareholders  before  it 
is  paid  or  when  partly  paid  and  levy  a  subsequent  assessment.  (Kor- 
bly  v.  Springfield  Inst.,  245  U.  S.,  330.) 

Assessment  ry  Shareholders. — The  directors  have  no  authority  to 
make  an  assessment  but  a  meeting  of,  the  stockholders  must  be  called 
and  they  must  lay  the  assessment  on  themselves.  The  assessment, 
however,  is  enforceable  only  by  subjecting  the  stock  of  the  persons 
refusing  to  pay,  and  no  action  will  lie  against  a  stockholder  per- 
sonally. (Commercial  Bank  v.  Weinhard,  192  U.  S.,  243;  s.  c,  41 
Oregon,  359;  Hulitt  v.  Bell,  85  Fed.  Rep.,  98.) 

§  118.  Withdrawal  of  Capital— Dividends— Bad  Debts.— No 
association,  or  any  member  thereof,  shall,  during  the  time  it  shall 
continue  its  banking  operations,  withdraw,  or  permit  to  be  with- 
drawn, either  in  the  form  of  dividends  or  otherwise,  any  portion  of 
its  capital.  If  losses  have  at  any  time  been  sustained  by  any  such 
association,  equal  to  or  exceeding  its  undivided  profits  then  on 
hand,  no  dividend  shall  be  made;  and  no  dividend  shall  ever  be 
made  by  any  association,  while  it  continues  its  banking  operations, 
to  an  amount  greater  than  its  net  profits  then  on  hand,  deducting 
therefrom  its  losses  and  bad  debts.  All  debts  due  to  any  associa- 
tions, on  which  interest  is  past  due  and  unpaid  for  a  period  of 
six  months,  unless  the  same  are  well  secured,  and  in  process  of 
collection,  shall  be  considered  bad  debts  within  the  meaning  of 
this  section.  But  nothing  in  this  section  shall  prevent  the  re- 
duction of  the  capital  stock  of  the  association  under  section  fifty- 
one  hundred  and  forty-three.     (Eev.  Stat.  U.  S.  Sec.  5204.) 

To  Prevent  Impairment. — This  section  is  intended  to  guard  against 
any  impairment  of  the  paid-in  capital,  especially  against  that  insidious 
form  of  impairment  so  dangerous  to  stockholders — its  withdrawal  in 
the  shape  of  dividends. 

Undivided  Profits. — Net  profits,  both  in  this  section  and  in  Section 
5199,  seem  to  mean  profits  other  than  legal  surplus  which  remain  at 
the  end  of  each  six  months  after  deducting  all  expenses,  losses,  and 
bad  debts. 


113 

Bad  Debts. — The  definition  of  bad  debts  is  as  plain  as  can  be  made 
of  a  thing  so  difficult  to  define.  There  is  one  positive  sign,  viz.,  in- 
terest past  due  and  unpaid  for  six  months,  and  two  qualifications; 
that  is,  even  if  interest  is  due  and  unpaid  for  six  months,  they  are 
still  not  bad  debts,  if,  first,  they  are  well  secured,  and,  second,  in 
process  of  collection.  The  indefiniteness  of  this  definition  consists  in 
the  difference  of  opinion  which  may  arise  as  to  security. 

§  119.  Dividends  and  Surplus  Funds. — The  directors  of  any 
association  may,  semi-annually,  declare  a  dividend  of  so  much  of 
the  net  profits  of  the  association  as  they  shall  judge  expedient; 
but  each  association  shall,  before  the  declaration  of  a  dividend, 
carry  one-tenth  part  of  its  net  profits  of  the  preceding  half  year 
to  its  surplus  fund  until  the  same  shall  amount  to  twenty  per 
centum  of  its  capital  stock.     (Eev.  Stat.  U.  S.  Sec.  5199.) 

Dividend  Periods. — This  section  is  permissive,  and  it  is  doubtful  if 
under  it  any  other  than  semi-annual  dividends  are  strictly  legal.  Still 
some  banks  declare  quarterly  and  a  few  monthly  and  bi-monthly 
dividends. 

Surplus  Fund. — The  surplus  fund  provided  for  in  this  section  up  to 
twenty  per  cent,  of  capital  must  be  maintained.  Any  amount  in  ex- 
cess may  be  distributed  in  dividends. 

Wrongful  Refusal  to  Declare  Dividends. — Where  the  earnings  prop- 
erly applicable  to  a  dividend  are  ample  for  such  purpose,  and  the 
directors,  or  a  majority  of  them,  acting  in  bad  faith  and  without 
reasonable  cause,  refuse  to  declare  a  dividend,  the  courts  will  inter- 
pose on  behalf  of  those  stockholders  who  otherwise  would  be  without 
remedy,  and  require  the  directors  to  make  a  dividend  of  a  reasonable 
amount.  (Hiscock  v.  Lacy,  9  Misc.  (N.  Y.),  578.)  An  action  for  this 
purpose  may  be  maintained  in  a  state  court.     (Id.) 

Suit  to  Recover  Illegal  Dividends. — The  Receiver  of  an  insolvent 
National  bank  may  maintain  a  suit  in  equity  against  the  shareholders 
to  recover  dividends  unlawfully  paid  to  them  out  of  the  capital  stock 
when  the  bank  has  earned  no  net  profit,  and  is  in  fact  insolvent.  (Hay- 
den  v.  Thompson,  71  Fed.  Rep.,  60.)  In  such  case  the  remedies  pro- 
vided by  the  National  Bank  Act  are  not  exclusive,  and  no  special  or- 
der of  the  Comptroller  of  the  Currency  is  necessary  to  enable  the  re- 
ceiver to  bring  suit.  (Id.) 
8 


114 

§  120.  Circulating-  Notes  Not  to  Be  Hypothecated. — No  asso- 
ciation shall,  cither  directly  or  indirectly,  pledge  or  hypothecate 
any  of  its  notes  of  circulation,  for  the  purpose  of  procuring  money 
to  be  paid  in  on  its  capital  stock,  or  to  be  used  in  its  banking  opera- 
tions, or  otherwise;  nor  shall  any  association  use  its  circulating 
notes,  or  any  part  thereof,  in  any  manner  or  form,  to  create  or  in- 
crease its  capital  stock.     (Eev.  Stat.  U.  S.  Sec.  5203.) 

Notes  of  circulation  are  to  be  issued  by  the  bank  in  ordinary  course 
of  business. 

§  121.  Each  Bank  to  Receive  Notes  of  Other  Banks. — Every  Na- 
tional banking  association  formed  or  existing  under  this  Title  shall 
take  and  receive  at  par,  for  any  debt  or  liability  to  it,  any  and  all 
notes  or  bills  issued  by  any  lawfully  organized  National  banking 
association.     (Eev.  Stat.  U.  S.  Sec.  5196.) 

By  Act  July  12,  1882,  Ch.  260,  Sec.  12,  it  is  provided  that  no  National 
bank  shall  be  a  member  of  any  clearing-house  in  which  gold  and  silver 
certificates  are  not  receiveable  in  settlement  of  clearing-house  balances, 
and  that  such  certificates  may  be  counted  as  a  part  of  the  bank's  law- 
ful reserve.  See  also  Act  March  14,  1900,  Ch.  41,  Sec.  6;  31  Stat.  U. 
S.,  48. 

§  122.  Banks  Not  to  Pay  Out  Uncurrent  Notes. —  No  associa- 
tion shall  at  an}-  time  pay  out  on  loans  or  discounts,  or  in  pur- 
chasing drafts  or  bills  of  exchange,  or  in  payment  of  deposits, 
or  in  any  other  mode  pay  or  put  into  circulation  the  notes  of  any 
bank  or  banking  association  which  are  not,  at  any  such  time,  re- 
ceivable at  par,  on  deposit,  and  in  payment  of  debts  by  the  asso- 
ciation so  paying  out  or  circulating  such  notes;  nor  shall  any 
association  knowingly  pay  or  put  in  circulation  any  notes  issued  by 
any  bank  or  banking  association  which  at  the  time  of  such  paying 
out  or  putting  in  circulation  is  not  redeeming  its  circulating  notes 
in  lawful  money  of  the  United  States.  (Rev.  Stat.  U.  S.  Sec. 
5206.) 

This  section  was  inserted  in  the  law  at  a  time  when  there  was  still 
a  large  amount  of  State  bank  notes  in  circulation,  and  it  had  reference 


115 

to  these  State  bank  notes  as  well  as  to  the  notes  of  National  banking 
associations. 

§  123.  Stamping  Counterfeit  Notes. — That  all  United  States 
officers  charged  with  the  receipt  or  disbursements  of  public  moneys, 
and  all  officers  of  National  banks,  shall  stamp  or  write  in  plain 
letters  the  word  "counterfeit,"  "altered,"  or  "worthless,"  upon 
all  fraudulent  notes  issued  in  the  form  of,  and  intended  to  circu- 
late as  money  which  shall  be  presented  at  their  places  of  business ; 
and  if  such  officers  shall  wrongfully  stamp  any  genuine  note  of 
the  United  States,  or  of  the  National  banks,  they  shall,  upon 
presentation,  redeem  such  notes  at  the  face  value  thereof.  (Act 
June  30,  1876,  Ch.  156,  Sec.  5;  19  Stat.  L.,  63.) 

§  124.  List  of  Shareholders. — The  president  and  cashier  of  every 
National  banking  association  shall  cause  to  be  kept  at  all  times 
a  full  and  correct  list  of  the  names  and  residences  of  all  the  share- 
holders in  the  association,  and  the  number  of  shares  held  by  each, 
in  the  office  where  its  business  is  transacted.  Such  list  shall  be 
subject  to  the  inspection  of  all  the  shareholders  and  creditors  of 
the  association,  and  the  officers  authorized  to  assess  taxes  under 
State  authority,  during  business  hours  of  each  day  in  which  busi- 
ness may  be  legally  transacted.  A  copy  of  such  list,  on  the  first 
Monday  of  July  of  each  year,  verified  by  the  oath  of  such  presi- 
dent or  cashier,  shall  be  transmitted  to  the  Comptroller  of  the 
Currency.     (Eev.  Stat.  U.  S.  Sec.  5210.) 

Blanks  for  this  list  are  sent  to  all  banks  from  the  Comptroller's  office 
each  year,  in  time  to  enable  the  bank  to  make  and  send  the  list. 

§  125.  Rate  of  Interest  Which  Bank  May  Charge. —  Any  asso- 
ciation may  take,  receive,  reserve,  and  charge  on  any  loan  or 
discount  made,  or  upon  any  note,  bill  of  exchange,  or  other  evi- 
dences of  debt,  interest  at  the  rate  allowed  by  the  laws  of  the 
State,  Territory,  or  district  where  the  bank  is  located,  and  no 
more,  except  that  where  by  the  laws  of  any  State  a  different  rate 
is  limited  for  banks  of  issue  organized  under  State  laws,  the  rate 
so  limited  shall  be  allowed  for  associations  organized  or  existing 


11G 

in  any  such  State  under  this  Title.  When  no  rate  is  fixed  by  the 
laws  of  the  State,  or  Territory,  or  district,  the  bank  may  take, 
receive,  reserve,  or  charge  a  rate  not  exceeding  seven  per  centum, 
and  such  interest  may  be  taken  in  advance,  reckoning  the  days 
from  which  the  note,  bill,  or  other  evidence  of  debt  has  to  run. 
And  the  purchase,  discount,  or  sale  of  a  bona-fide  bill  of  exchange, 
payable  at  another  place  than  the  place  of  such  purchase,  dis- 
count, or  sale,  at  not  more  than  the  current  rate  of  exchange  for 
sight-drafts  in  addition  to  the  interest,  shall  not  be  considered  as 
taking  or  receiving  a  greater  rate  of  interest.  (Eev.  Stat.  U.  S. 
Sec.  5197.) 

State  Rate  Limit. — This  section  allows  National  banks  to  charge 
the  rate  of  interest  allowed  by  the  State  to  natural  persons  generally, 
and  a  higher  rate  if  State  banks  of  issue  are  authorized  to  charge  a 
higher  rate.  (Tiffany  v.  National  Bank,  18  Wallace,  409.)  Though 
the  consequences  of  acceptance  of  usurious  interest  by  a  National 
bank  and  the  penalties  to  be  enforced  are  to  be  determined  by  the 
provisions  of  the  National  Banking  Act,  the  ascertainment  of  the  rate 
of  interest  allowable  is  to  be  according  to  the  State  law.  (Farmers',  etc., 
Bank  v.  Dearing,  91  U.  S.,  29,  32;  Haseltine  v.  Bank,  183  U.  S.,  132, 
134.)     (Id.) 

General  State  Rate  Governs. — >But  it  is  the  rate  of  interest  allowed 
to  the  banks  of  the  State  generally  that  a  National  bank  may  charge; 
and  the  fact  that  a  few  of  the  State  banks  are  specially  authorized  to 
take  a  higher  rate  does  not  warrant  the  National  banks  in  doing  the 
same.  (Gruber  v.  First  National  Bank,  87  Pa.  St.,  468.  But  see  First 
National  Bank  of  Mount  Pleasant  v.  Tinstman,  Fed.  Case  No.  4805.) 
Nor  is  it  to  be  understood  that  whatever  by  the  laws  of  the  State  is 
lawful  for  natural  persons  in  acquiring  title  to  negotiable  paper  is 
lawful  for  National  banks.  (National  Bank  v.  Johnson,  104  U.  S., 
271.)  Thus,  though  the  State  law  fixes  no  limit  to  the  rate  which 
natural  persons  may  take  for  the  discount  or  purchase  of  business 
paper,  this  does  not  authorize  the  National  banks  to  discount  such 
paper  at  higher  than  the  legal  rate.  (Johnson  v.  National  Bank  of 
Gloversville,  74  N.  Y.,  329;  affirmed  in  National  Bank  v.  Johnson,  104 
U.  S„  271.) 

Seven  Per  Cent.  Limit. — And  where  the  State  law  does  not  limit 
the  rate  of  interest  which  may  be  charged  on  loans  to  corporations,  a 
National  bank  located  in  that  State  can  not  charge  more  than  seven 


117 

per  cent,  on  such  loans.  (In  re  Wild,  Fed.  Case  No.  4173,  11  Blatch- 
ford,  243.)  But  if  the  statutes  of  the  State  expressly  authorized 
parties  to  contract  for  any  rate  of  interest  National  banks  may  do 
likewise,  and  are  not,  in  such  case,  limited  to  seven  per  cent.  (Daggs 
v.  Phcenix  Bank,  177  U.  S.,  549;  Hinds  v.  Marrnelejo,  60  Cal.,  229; 
National  Bank  v.  Bruhn,  64  Tex.,  571;  Rockwell  v.  Farmers'  National 
Bank,  4  Colo.  App.,  562;  Wolverton  v.  Exchange  Nat.  Bank,  11  Wash., 
94.)  Where  a  State  statute  fixes  a  certain  rate  as  the  legal  rate,  but 
authorizes  parties  to  agree  in  writing  for  a  higher  rate,  the  National 
banks  are  permitted  to  charge  such  higher  rate  by  written  agreement. 
(Wiley  v.  Starbuck,  44  Ind.,  298;  Newell  v.  National  Bank  of  Somer- 
set, 12  Bush  (Ky.),  57.)  A  National  bank  in  Mississippi  is  not  al- 
lowed to  retain  interest  in  advance,  but  can  charge  interest  only  on 
the  sum  actually  loaned.  (Timberlake  v.  First  National  Bank,  43  Fed. 
Rep.,  231.) 

Agreement  as  to  Time  of  Entering  Credit. — The  bank  and  its  cus- 
tomer have  the  right  to  agree  as  to  the  time  of  entering  credits,  and 
if  such  agreement  is  made  in  good  faith  to  equalize  the  interest  on 
different  items,  and  not  for  the  purpose  of  receiving  illegal  interest, 
it  is  not  a  violation  of  the  law.  (Timberlake  v.  First  National  Bank, 
43  Fed.  Rep.,  231.)     (Id.) 

Application  of  Payments. — Where  payments  are  made  generally  to 
a  National  bank  on  a  promissory  note  which  include  unlawful  interest, 
they  will  be  applied  on  the  principal.  (Hall  v.  First  Nat.  Bank  of  Fair- 
field, 30  Neb.,  94;  Citizens'  Nat.  Bank  v.  Forman's  Assignee,  111  Ky., 
206.)  The  fact  that  the  payments  made  by  the  debtor  have  been  ap- 
plied by  the  bank  on  its  books  to  interest  as  such  does  not  authorize 
the  presumption  that  the  debtor  so  applied  them,  where  he  had  no 
access  to  the  books,  and  no  knowledge  of  the  application  made  by 
the  bank.  (Second  Nat.  Bank  of  Richmond  v.  Fitzpatrick,  111  Ky., 
228.) 

Purchase  of  Drafts. — In  a  case  in  the  United  States  Circuit  Court 
of  Appeals  it  was  held  that  where  a  National  bank  purchases  drafts 
at  a  rate  of  discount  larger  than  the  rate  of  interest  allowed  by  the 
law  of  the  State,  this  will  be  usury.  (Danforth  v.  National  State 
Bank,  48  Fed.  Rep.,  271.)  Where  the  maximum  rate  of  interest  al- 
lowed by  the  State  to  be  taken  or  reserved  is  eight  per  cent,  per  an- 
num, a  National  bank  within  the  State  may  discount  notes  and  re- 
serve interest  at  the  rate  of  eight  per  cent,  per  annum  upon  the  face 
of  the  notes.  (Evans  v.  National  Bank  of  Savannah,  U.  S.  Sup.  Ct, 
Oct.  Term,  1919.) 


118 

Usury  Patd  by  Corporations. — 'The  inhibition  contained  in  this  sec- 
tion is  general  and  forbids  the  taking  of  usurious  interest  from  an 
(artificial,  as  well  as  from  a  natural,  person.  (Albion  Bank  v.  Mont- 
gomery, 54  Neb.,  681.) 

Promise  of  Cashier  to  Pay  Usurious  Interest. — The  promise  of  the 
cashier  to  pay  interest  upon  a  deposit  at  an  usurious  rate  will  not 
bind  the  bank;  but  the  bank  would  be  bound  to  return  the  amount 
actually  received  by  it.     (Hansen  v.  Heard,  69  N.  H.,  190.) 

Plea  of  Usury  by  National  Bank — State  Statute. — A  State  statute 
providing  that  corporations  shall  not  plead  usury  applies  to  National 
banks.     (Binghamton  Trust  Company  v.  Anten,  68  Ark.,  299.) 

§  128.  Penalty  for  Taking  Usurious  Interest. —  The  taking,  re- 
ceiving, reserving,  or  charging  a  rate  of  interest  greater  than  is 
allowed  by  the  preceding  section,  when  knowingly  done,  shall  be 
deemed  a  forfeiture  of  the  entire  interest  which  the  note,  bill, 
or  other  evidence  of  debt  carries  with  it,  or  which  has  been  agreed 
to  be  paid  thereon.  In  case  the  greater  rate  of  interest  has  been 
paid,  the  person  by  whom  it  has  been  paid,  or  his  legal  representa- 
tives, may  recover  back,  in  an  action  in  the  nature  of  an  action 
of  debt,  twice  the  amount  of  the  interest  thus  paid  from  the  asso- 
ciation taking  or  receiving  the  same;  provided  such  action  is  com- 
menced within  two  years  from  the  time  the  usurious  transaction 
occurred.     (Rev.  Stat.  U.  S.  Sec.  5198.) 

Intent  of  the  Law. — The  Supreme  Court  of  the  United  States  has 
analyzed  this  section  as  follows:  "Two  categories  are  thus  defined, 
and  the  consequences  denounced.  (1)  Where  illegal  interest  has  been 
knowingly  stipulated  for,  but  not  paid,  then  only  the  sum  lent,  without 
interest,  can  be  recovered.  (2)  Where  such  illegal  interest  has  been 
paid,  then  twice  the  amount  so  paid  can  be  recovered  in  a  penal  action 
of  debt,  or  suit  in  the  nature  of  such  action,  against  the  offending 
bank,  brought  by  the  persons  paying  the  same,  or  their  legal  repre- 
sentatives."    (Barnet  v.  Muncie  Nat.  Bank,  98  U.  S.,  855.) 

Remedy  Where  Action  is  by  the  Bank. — Where  the  bank  sues  to  re- 
cover the  loan,  it  can  not,  if  there  has  been  usury,  recover  any  interest 
at  all,  but  only  the  principal  of  the  loan.  (Barnet  v.  Muncie  N.  Bk., 
98  U.  S.,  855.)  Nor  can  it  meet  the  plea  of  usury  by  electing  to  remit 
the  excessive  interest.     (Citizens'  N.  Bk.  v.  Donnel,  195  U.  S.,  369.) 


119 

But  the  defendant,  if  he  has  paid  the  usurious  interest,  can  not  avail 
himself  of  such  payment  as  a  set-off  or  counter  claim  against  the 
principal  of  the  loan  sued  on;  he  must  bring  a  separate  action  therefor. 
(Barnet  v.  Muncie  N.  Bk.,  98  U.  S.,  855;  Haseltine  v.  Central  N.  Bk., 
183  U.  S.,  132;  Peterborough  N.  Bk.  v.  Childs,  133  N.  Y.,  248;  Ellis  v. 
First  N.  Bk.  of  Olney,  11  111.  App.,  275;  Rockwell  v.  Farmers'  N.  Bk., 
4  Colo.  App.,  562;  Huggin  v.  Citizens'  N.  Bk.,  6  Tex.  Civ.  App.,  33; 
Norfolk  N.  Bk.  v.  Schwenk,  46  Neb.,  381;  Marion  N.  Bk.  v.  Thompson, 
101  Ky.,  277;  First  N.  Bk.  v.  Hunter,  109  Tenn.,  91;  Cox  v.  Beck,  83 
Fed.  Rep.,  269;  Merchants'  Nat.  Bank  v.  Sharkey,  64  Ore.,  32;  Bank  of 
Weston  v.  Lynch,  69  W.  Va.,  333.)  And  usurious  interest  paid  on  re- 
newing a  series  of  notes  can  net,  in  an  action  by  the  bank  on  the  last 
of  them,  be  applied  in  satisfaction  of  the  debt.  (Driesbach  v.  National 
Bank,  104  U.  S.,  52;  Charleston  Nat.  Bank  v.  Bradford,  51  W.  Va.,  255.) 

No  Statute  of  Limitations  Where  Action  is  by  Bank. — Where  a 
National  bank  sues  upon  an  usurious  contract  the  debtor  may  always 
plead  usury,  for  in  such  an  action  there  is  no'  statute  of  limitations. 
(McCarthy  v.  First  Nat.  Bank,  223  U.  S.,  493.)  The  two  years  men- 
tioned in  Section  5198  Rev.  Stat,  applies  only  to  actions  brought  against 
a  bank  to  recover  the  penalty  prescribed  by  that  section.     (Id.) 

What  Intebest  Forfeited — Interest  After  Maturity. — Where  the 
instrument  carries  with  it  illegal  interest,  the  whole  interest  is  for- 
feited, and  not  merely  that  which  the  party  borrowing  may  agree  to 
pay.  The  usury  destroys  the  interest-bearing  power  of  the  obligation, 
and  there  is  no  point  of  time  from  which  it  can  bear  interest.  Not 
only  does  it  forfeit  the  interest  accruing  before  maturity,  but  as  well 
that  accruing  after  maturity  (Lucas  v.  Government  Nat.  Bank,  78  Pa. 
St.,  228;  Shunk  v.  First  Nat.  Bank  of  Galion,  22  Ohio  St.,  508;  National 
State  Bank  v.  Brainard,  61  Hun.,  339;  First  Nat.  Bank  v.  Grimes,  49 
Kans.,  219),  though  the  latter  rate  be  lawful  (Shafer  v.  First  Nat. 
Bank,  53  Kans.,  614),  or  the  interest  which  otherwise  would  accrue 
by  law  upon  non-payment  after  maturity.  (Henderson  Nat.  Bank  v. 
Alves,  91  Ky.,  142.)  And  an  amount  paid  on  the  paper  after  the 
maturity  thereof  must  be  credited  on  the  principal  without  regard 
to  when  the  interest  thereo'n  accrued.  (National  State  Bank  v.  Brain- 
ard, 61  Hun.,  339.)  By  charging  more  than  legal  interest  on  over- 
drafts the  bank  will  lose  the  right  to  recover  any  interest  at  all. 
(Third  Nat.  Bank  of  Philadelphia  v.  Miller,  90  Pa.  St.,  241.)  Though  it 
has  been  held  that  a  National  bank  by  contracting  for  usurious  in- 
terest forfeits  interest  only  to  the  date  of  bringing  suit  on  the  note, 
and  judgment  for  the  principal  should  bear  interest  at  the  legal  rate 
from  the  date  of  filing  the  petition.     (Second  Nat.  Bank  of  Richmond 


120 

v.  Fitzpatrick,  111  Ky.,  228.)  Where  a  National  bank  has  rediscounted 
notes  at  an  usurious  rate  of  interest,  the  fact  that  the  bank  for  which 
the  rediscount  was  made  has  charged  illegal  interest  on  those  notes 
to  its  customers  will  not  affect  its  right  to  set  up  the  defense  of  usury 
in  an  action  by  the  re-discounting  bank.  (Id.)  As  to  whether  a  Na- 
tional bank  can  discount  a  note  containing  a  provision  to  pay  an  at- 
torney's fee  if  suit  shall  be  brought  to  enforce  payment,  see  Merchants' 
Nat.  Bank  v.  Sevier  (14  Fed.  Rep.,  662). 

Renewals. — If  the  note  is  renewed  from  time  to  time,  no  portion  of 
usurious  interest  included  in  the  renewal  note  can  be  recovered.  (First 
Nat.  Bank  of  Mead  Centre  v.  Grimes,  49  Kans.,  219.)  And  the  usury 
is  not  purged  by  settlements  and  renewal  notes  without  additional 
usury.  (Pickett  v.  Merchants'  Nat.  Bank  of  Memphis,  32  Ark.,  346.) 
In  a  suit  upon  the  last  renewal  the  bank  can  recover  only  the  principal 
sum  originally  advanced.  (Snyder  v.  Mount  Sterling  Nat.  Bank,  94 
Ky.,  231.)  And  any  payments  made  upon  any  of  such  notes  will  be 
applied  to  the  principal.  (Id.)  And  even  though  the  interest  upon 
the  renewal  notes  has  been  reduced  to  the  legal  rate,  no  part  of  the 
same  can  be  recovered.  (Farmers'  and  Mechanics'  Bank  v.  Hoagland, 
7  Fed.  Rep.,  159.)  A  note  given  for  already  accrued  interest,  in  part 
usurious,  is  without  consideration;  and  suspension  of  the  right  of 
collection,  between  its  date  and  maturity,  in  no  way  operates  to  supply 
the  essential  element  otherwise  lacking.  (McGhee  v.  First  Nat.  Bank 
of  Tobias,  40  Neb.,  920  But  in  order  to  render  the  bank  liable  to  the 
penalty  of  doubling  the  amount  of  interest  paid  prescribed  by  this 
section,  the  illegal  interest  must  have  been  actually  paid;  and  it  is 
not  sufficient  that  it  was  carried  into  renewal  notes.  (Brown  v. 
Marion  Nat.  Bank,  169  U.  S.,  416;  First  Nat.  Bank  v.  Lavater,  196 
U.  S.,  115;  Osbom  v.  First  Nat.  Bank,  175  Pa.  St.,  494.) 

Penalty  foe  Taking  Usury — Knowledge  of  Bank — Allegations  of 
Complaint. — To  subject  the  bank  to  the  penalty  for  taking  usurious 
interest  there  must  have  been  paid  not  only  a  larger  rate  of  interest 
than  that  allowed  by  law,  but  that  larger  rate  must  have  been  know- 
ingly received.  (Timberlake  v.  First  Nat.  Bank,  43  Fed.  Rep.,  231.) 
And  the  petition  or  complaint  must  allege  that  it  was  knowingly  re- 
ceived. (Henderson  Nat.  Bank  v.  Alves,  91  Ky.,  142;  Schuyler  Nat. 
Bank  v.  Bullong,  24  Neb.,  321.)  As  to  when  allegations  of  complaint 
are  sufficient  to  sustain  a  judgment  in  an  action  against  a  National 
bank  for  exacting  usurious  interest,  see  First  Nat.  Bank  v.  Morgan,  132 
U.  S.,  141;  Guild  v.  First  Nat.  Bank  of  Deadwood,  4  S.  D.,  566;  Farm- 
ers' Nat.  Bank  v.  McCoy,  42  Okla.,  420. 


121 

Amount  of  Penalty. — The  penalty  is  twice  the  amount  of  interest 
paid  and  is  not  limited  to  twice  the  excess  above  the  legal  rate.  (First 
Nat.  Bank  v.  Watt,  184  U.  S.,  151;  Henderson  Nat.  Bank  v.  Alves,  91 
Ky.,  142;  Schuyler  Nat.  Bank  v.  Bullong,  28  Neb.,  684;  Hill  v.  National 
Bank  of  Barre,  15  Fed.  Rep.,  432;  Second  Nat.  Bank  v.  Fitzpatrick,  111 
Ky.,  228;  Watt  v.  First  Nat.  Bank,  76  Minn.,  458.)  But  in  a  suit  to 
recover  such  penalty  the  plaintiff  can  not  be  allowed  interest  on  the 
amount.  (McCreary  v.  First  Nat.  Bank  of  Morristown,  109  Tenn.,  128.) 
It  has  been  held,  however,  that  a  judgment  against  a  National  bank 
for  twice  the  amount  of  interest  paid,  as  a  penalty  for  taking  usury, 
should  allow  interest  from  the  date  of  filing  the  petition  to  recover  the 
penalty,  that  being  the  date  of  the  first  demand  therefor.  (Second 
Nat.  Bank  v.  Fitzpatrick,  111  Ky.,  228.) 

Usurious  Interest  Must  Have  Been  Actually  Paid — What  Wtll 
Constitute  Payment. — In  order  that  the  borrower  may  maintain  an 
action  against  the  bank  to  recover  the  penalty  provided  by  the  statute 
for  taking  usurious  interest,  such  usurious  interest  must  have  been 
actually  paid,  and  it  is  not  sufficient  that  such  interest  is  merely 
charged  to  his  account.  (Hall  v.  First  Nat.  Bank  of  Fairfield,  30 
Neb.,  99.)  Nor  is  it  sufficient  that  the  interest  was  reserved  from  the 
original  loan  by  way  of  discount.  (McCarthy  v.  First  Nat.  Bank,  223 
U.  S.,  493;  Smith  v.  First  Nat.  Bank,  42  Neb.,  687;  Citizens'  Nat.  Bank 
v.  Forman's  Assignee,  111  Ky.,  206;  compare  National  Bank  of  Rahway 
v.  Carpenter,  52  N.  J.  Law,  165.)  And  as  the  payment  contemplated  by 
the  statute  is  an  actual  payment,  and  not  a  further  promise  to  pay, 
the  giving  of  a  renewal  note  will  not  sustain  a  recovery  of  the  penalty. 
(First  Nat.  Bank  v.  Latham,  37  Okla.,  286.)  Nor  will  facts  constituting 
an  accord  and  satisfaction.     (Id.) 

Where  Payment  Made  in  Property. — The  borrower  may  recover  the 
penalty  where  the  usurious  interest  has  been  paid  by  a  transfer  of 
property.  (First  Nat.  Bank  v.  Davis,  135  Ga.,  687.)  But  where  prop- 
erty is  accepted  as  payment,  its  market  value  at  the  time  must  exceed 
the  principal  and  lawful  interest.  (Id.)  And  it  must  appear  that  the 
transfer  and  delivery  of  the  property  was  tendered  by  the  debtor  and 
accepted  by  the  bank,  not  only  as  payment  of  the  lawful  interest,  but 
also  of  the  illegal  interest.     (Id.) 

When  Right  of  Action  Accrues — Limitation. — The  period  of  two 
years  within  which  the  action  to  recover  the  penalty  must  be  brought 
begins  to  run  from  the  time  the  interest  is  actually  paid,  and  not 
from  the  time  it  was  agreed  to  be  paid.  (National  Bank  of  Dainger- 
field  v.  Ragland.  181  U.  S.,  45.)     And  if  such  usurious  interest  is  in- 


122 

eluded  in  a  note,  the  limitation  does  not  begin  to  run  until  the  note  is 
paid.  (Id.)  So,  where  the  interest  upon  one  note  is  included  in  the 
amount  of  another  note,  which  is  subsequently  paid  in  full.  (Second 
Nat.  Bank  v.  Fitzpatrick,  111  Ky.,  228.)  And  where  usurious  interest 
has  been  paid  in  advance  the  two-year  limitation  begins  to  run  when 
such  payment  is  made,  and  not  from  the  time  when  the  note  is  paid. 
(McCarthy  v.  First  Nat.  Bank,  223  U.  S.,  493.)  Each  payment  of  il- 
legal interest  is  regarded  as  "a  transaction"  within  the  intent  of  the 
statute,  and  when  such  payment  is  actually  made,  or  accrues,  the  two 
years'  limitation  commences  to  run.  (First  Nat.  Bk.  of  Dorchester  v. 
Smith,  39  Neb.,  90;  Lynch  v.  Bank,  22-  West  Va.,  534;  Nat.  Bk.  v.  Car- 
penter, 52  N.  J.,  Law,  165;  McCarthy  v.  First  Nat.  Bk.,  121  N.  W.  Rep., 
853;  Bobs  v.  People's  Nat.  Bank,  21  Fed.  Rep.,  888.)  But  the  payment 
of  the  loan  is  not  a  condition  precedent  to  the  right  of  the  borrower 
to  maintain  an  action  to  recover  the  penalty  for  the  usurious  interest 
paid.  The  penalty  for  all  illegal  interest  paid  within  two  years  may 
be  recovered  in  one  action,  whether  the  amount  was  in  one  payment  or 
in  several.     (Hintermister  v.  First  Nat.  Bank,  64  N.  Y.,  212.) 

"Who  May  Being  Action  for  Penaxtt. — Only  the  party  paying  the  il- 
legal interest,  or  his  representatives,  can  recover  the  penalty  therefor. 
(Timberlake  v.  First  Nat.  Bank,  43  Fed.  Rep.,  231.)  But  the  person 
making  payment  may  do  so,  though  he  is  an  accommodation  maker. 
(Trabue  v.  Cook,  12  S.  W.  Rep.,  455.)  The  action  can  not  be  brought 
by  a  guarantor  or  surety.  (Lazear  v.  National  Union  Bank,  52  Md., 
73.)  And  one  of  the  joint  makers  of  a  note  can.  not  recover  the  penalty 
where  the  illegal  interest  was  paid  by  the  other  maker.  (Timberlake 
v.  First  Nat.  Bank,  43  Fed.  Rep.,  231;  First  Nat.  Bank  of  Concordia  v. 
Rowley,  52  Kans.,  394;  Trabue  v.  Cook,  12  S.  W.  Rep.,  455.)  But  where 
joint  makers  have  paid  separately,  but  from  a  joint  fund,  they  may 
join  in  an  action  for  the  penalty.  (Merchants'  and  Planters'  Nat. 
Bank  v.  Horton,  27  Okla.,  689.)  Where  a  bankrupt  has  paid  illegal 
interest,  Tiis  assignee  may  bring  such  action.  (Wright  v.  First  Nat. 
Bank,  Fed.  Case  No.  18,078,  8  Bliss.,  243;  Cro'cker  v.  First  Nat.  Bank, 
Fed.  Case  No.  3397;  Henderson  Nat.  Bank  v.  Alves,  91  Ky.,  142.  But 
see  Osborn  v.  First  Nat.  Bank  of  Athens,  175  Pa.  St.,  474.)  But  if  the 
trustee  in  bankruptcy  fails  to  administer  such  asset,  the  bankrupt, 
after  discharge,  may  sue  on  the  claim.  (Lasater  v.  First  Nat.  Bank  of 
Jacksboro,  96  Tex.,  345.)  The  right  is  conferred  upon  an  artificial,  as 
well  as  upon  a  natural,  person.  (Albion  Nat.  Bank  v.  Montgomery,  54 
Neb.,  681.)  But  several  of  the  joint  makers  of  a  note  on  which  il- 
legal interest  is  paid  by  such  parties  individually  can  not  unite  in  one 
action  to  recover  such  penalty.  (Teague  v.  First  Nat.  Bank  of  Salina, 
5  Kans.  App.,  300.)     The  statute  confers  upon  the  parties  separate 


123 

rights,  and  the  fact  that  they  have  paid  equal  amounts  can  not  change 
the  rule.  The  cause  of  action  accrues  to  the  one  paying  the  unlawful 
interest,  and  to  each  one  making  such  a  payment.     {Id.) 

Effect  of  Usury  ox  the  Contract  of  tfte  Parties. — Usury  does  not 
render  the  contract  void  (Farmers'  and  Mechanics'  Nat.  Bank  v.  Dear- 
ing,  91  U.  S.,  29);  nor  defeat  the  title  of  the  bank  to  the  instrument 
(Newell  v.  Somerset  First  Nat.  Bank  (Ky.),  13  Ky.  L.  Rep.,  775);  nor 
does  it  avoid  an  endorsement  or  guaranty  of  the  paper  upon  which  the 
usurious  interest  is  reserved  or  paid.  (Lazear  v.  National  Union  Bank, 
52  Md.,  78;  Oates  v.  First  Nat.  Bank,  100  U.  S.,  239.)  And  the  usurious 
character  of  the  transaction  between  the  bank  and  the  payee  will  not 
affect  the  liabilities  of-  antecedent  parties  to-  the  instrument.  (Smith 
v.  Exchange  Nat.  Bank,  26  Ohio  St.,  141.) 

State  Laws. — The  penalties  provided  by  this  section  of  the  National 
Bank  Act  are  exclusive;  and  the  usury  laws  of  the  State,  and  the 
penalties  therein  provided,  have  no  application  to  the  National  banks. 
(Farmers'  and  Mechanics'  Bank  v.  Dearing,  91  U.  S.,  29;  Stephens  v. 
Monongahela  Bank,  111  U.  S.,  197;  Barnet  v.  Muncie  Nat.  Bank,  98 
U.  S.,  855;  Hintermister  v.  First  Nat.  Bank,  64  N.  Y.,  212;  Central  Nat. 
Bank  v.  Pratt,  115  Mass.,  539;  First  Nat.  Bank  v.  Garlinghouse,  22 
Ohio  St.,  492;  Wiley  v.  Starbuck,  44  Ind.,  298;  Slaughter  v.  First  Nat. 
Bank  of  Montgomery,  109  Ala.,  157;  Charleston  Nat.  Bank  v.  Bradford, 
51  W.  Va.,  255.)  Nor  do  the  provisions  of  the  Judiciary  Acts  of  March 
3,  1887,  and  August  13,  1888,  have  the  effect  of  subjecting  National 
banks  to  the  penalties  fixed  by  the  States  for  exacting  unlawful  in- 
terest. (Norfolk  Nat.  Bank  v.  Schwenk,  41  Neb.,  3S1.)  Nor  is  this  the 
effect  of  the  proviso  to  Section  4  of  the  Act  of  July  12,  IS 82.  (Lanhara 
v.  First  Nat.  Bank  of  Crete,  46  Neb.,  663.)  But  a  National  bank  which 
has  succeeded  to  the  business  of  a  private  bank  may  incur  the  penal- 
ties which  attached  to  the  former  institution  when  endeavoring  to  en- 
force the  obligation  acquired  from  it.  (Exeter  Nat.  Bank  v.  Orchard, 
42  Neb.,  579.)  Whei'e  usurious  interest  is  paid  to  a  National  bank, 
the  transaction  is  governed  by  the  laws  of  the  United  States,  though 
the  security  is  taken  in  the  name  of  the  President  of  the  bank  in  his 
individual  name.     (Schuyler  Nat.  Bank  v.  Gadsden,  191  U.  S.,  451.) 

Jurisdiction  of  State  Courts. — The  defense  of  usury  may  be  set  up 
in  an  action  brought  in  a  State  court  (National  Bank  of  Winterset  v. 
Eyre,  52  Iowa,  114),  and  State  courts  have  jurisdiction  of  actions  for 
the  recovery  of  the  penalty  prescribed  for  taking  illegal  interest. 
(Ordway  v.  Central  Nat.  Bank,  47  Md.,  217;  Bletz  v.  Columbia  Nat. 
Bank,  87  Pa.   St.,  87;   Hade  v.  McVey,  31  Ohio  St.,  231;   McCreary  v. 


124 

First  Nat.  Bank,  109  Tenn.,  12S.)  Such  action  may  be  brought  in 
any  local  court  in  the  county  having  jurisdiction  of  the  amount  in- 
volved. (Schuyler  Nat.  Bank  v.  Bullong,  28  Neb.,  684;  First  Nat.  Bank 
of  Tecumseh  v.  Overman,  22  Neb.,  116;  Henderson  Nat.  Bank  v.  Alves, 
01  Ky.,  142;  Farmers'  Nat.  Bank  v.  McCoy,  42  Okla.,  420.  But  see 
Newell  v.  National  Bank  of  Somerset  (Ky.),  12  Bush,  57.)  But  the 
courts  of  one  State  have  no  jurisdiction  of  an  action  against  a  National 
bank  located  in  another  State  to  recover  the  penalty.  (Missouri  River 
Telegraph  Company  v.  First  Nat.  Bank  of  Sioux  City,  74  111.,  217.) 

Construction  of  tue  Statute. — The  statute  will  be  liberally  con- 
strued to  effect  the  ends  for  which  it  was  passed,  but  a  forfeiture  under 
its  provisions  will  not  be  declared  unless  the  facts  upon  which  it  rests 
are  clearly  established.  And  since  the  courts  uniformly  incline  against 
the  declaration  of  a  forfeiture,  the  party  seeking  such  declaration 
should  be  held  to  make  convincing  proof  of  each  essential  to  forfeiture. 
(Wheeler  v.  Union  Nat.  Bank,  96  U.  S.,  785.)  A  doubt  as  to  whether 
there  has  been  a  taking  of  illegal  interest  will  be  resolved  in  favor  of 
the  bank.  (Timberlake  v.  First  Nat.  Bank,  43  Fed.  Rep.,  231;  Wheeler 
v.  Union  Nat.  Bank  of  Pittsburg,  96  U.  S.  785.)  But  the  statute  is  not 
a  penal  statute,  and  does  not  require  to  be  strictly  construed.  (Albion 
Nat.  Bank  v.  Montgomery,  54  Neb.,  681.) 

Compounding  Interest. — Where  interest  is  compounded  in  a  manner 
prohibited  by  the  State  statute,  all  interest  is  forfeited,  though  the 
total  is  less  than  the  maximum  rate  allowed  by  the  State.  (Citizens' 
Nat.  Bank  v.  Donnell,  195  U.  S.,  369.) 

Usurious  Loans  to  Directors. — A  director  is  not,  by  reason  of  his 
position,  estopped  from  setting  up  the  defense  of  usury  in  an  action 
brdught  against  him  by  the  bank.  (Bank  of  Cadiz  v.  Slemans,  34  Ohio 
St.,  142.) 

When  Rxtle  de  Minimis  Applies. — Where  the  illegal  interest  exacted 
amounts  to  only  five  cents,  the  rule  de  minimis  non  curat  lex  applies, 
and  the  bank  will  not  be  liable  to  a  penalty  therefor.  (Slaughter  v. 
First  Nat.  Bank  of  Montgomery,  109  Ala.,  157.) 

Waiver. — 'The  forfeiture  is  not  waived  by  giving  a  separate  note  for 
the  interest,  or  by  giving  a  renewal  note  in  which  is  included  the 
usurious  interest.  (Brown  v.  Marion  Nat.  Bank  of  Lebanon,  169  U.  S., 
416.) 


CHAPTER  VI. 

Reports  and  Examinations. 

Section  127.  Reports  to  Comptroller — Publication  of. 

128.  Reports  of  Dividends  and  Net  Earnings. 

129.  Penalty  for  Failure  to  Make  Reports. 

130.  Verification  of  Returns  of  National  Banks. 

131.  Appointment,  Powers,  Duties,  Salaries,  etc.,  of  Ex- 

aminers. 

132.  Examiners  Not  to  Disclose  Information. 

133.  Loans,    Gratuities   and   Commissions    to   Examiners 

Forbidden. 

134.  Examinations  by  Federal  Reserve  Board  and  Federal 

Reserve  Banks. 

135.  Limitation  of  Visitorial  Powers. 

§  127.  Reports  to  Comptroller — Publication  of. — Every  associa- 
tion shall  make  to  the  Comptroller  of  the  Currency  not  less  than 
five  reports  during  each  year,  according  to  the  form  which  may  be 
prescribed  by  him,  verified  by  the  oath  or  affirmation  of  the  presi- 
dent or  cashier  of  such  association,  and  attested  by  the  signatures 
of  at  least  three  of  the  directors.  Each  such  report  shall  exhibit, 
in  detail  and  under  appropriate  heads,  the  resources  and  liabilities 
of  the  associations  at  the  close  of  business  on  any  past  day  by  him 
specified;  and  shall  be  transmitted  to  the  Comptroller  within  five 
days  after  the  receipt  of  a  request  or  requisition  therefor  from  him 
and  in  the  same  form  in  which  it  is  made  to  the  Comptroller  shall 
be  published  in  a  newspaper  published  in  the  place  where  such 
association  is  established,  or  if  there  is  no  newspaper  in  the  place, 
then  in  one  published  nearest  thereto  in  the  same  county,  at  tho 
expense  of  the  association;  and  such  proof  of  publication  shall  be 
furnished  as  may  be  required  by  the  Comptroller.     The  Comp- 

125 


12G 

troller  shall  also  have  power  to  call  for  special  reports  from  airy 
particular  association  whenever  in  his  judgment  the  same  are 
necessary  in  order  to  have  a  full  and  complete  knowledge  of  its  con- 
dition. (Bev.  Stat.  U.  S.  Sec.  5211;  Act  Feb.  27,  1877,  Oh.  69; 
19  Stat.  L.,  252.) 

For  power  of  Federal  Reserve  Board  to  examine  National  banks  and 
require  reports  from  them,  see  Section  11  (a)  of  Federal  Reserve  Act, 
§  225,  page  229. 

In  the  case  of  Riggs  Nat.  Bank  v.  Comptroller  of  the  Currency  et  ah, 
44  Washington  Law  Reporter,  434,  the  court  upheld  the  right  of  the 
Comptroller  to  call  for  detailed  and  special  information  from  a  Na- 
tional bank. 

Owing  to  changes  in  the  form  of  each  report  of  condition  it  is  im- 
possible to  analyze  this  report  in  detail. 

Only  a  few  of  the  requirements  in  making  up  such  a  report  can  be 
considered. 

Form  of  Report. — Banks  should  always  use  the  latest  form  of  report 
furnished  by  the  Comptroller,  and  none  other  will  be  accepted. 

Word  "None." — 'The  word  "none"  must  be  inserted  on  the  face  of  the 
report  in  the  special  column  provided  therefor  if  no  amount  is  to  be 
entered  in  the  item  and  likewise  in  all  schedules.  If  there  is  more 
than  one  column  in  a  schedule,  the  word  "none"  should  be  so  written 
that  it  covers  all  columns.  Failure  to  do  so  will  require  the  bank  to 
make  up  new  report. 

Proof  of  Publication. — The  publisher's  certificate  must  be  an  exact 
copy  of  the  figures  shown  in  the  report  of  condition.  It  must  be  signed 
and  sworn  to  by  the  same  officer  and  before  the  same  notary  that  took 
the  oath  of  the  report  of  condition,  also  bear  the  autograph  signatures 
of  the  same  three  directors  that  attested  the  report  of  condition.  It 
is  required  that  the  report  must  be  published  in  a  newspaper  pub- 
lished in  the  same  city  Or  town  as  bank  is  located,  and  if  no  news- 
paper is  published,  then  in  the  one  nearest  thereto  in  the  same  county. 
The  length  of  time  the  paper  has  been  in  business  has  no  bearing  on 
the  subject,  the  only  requirement  being  that  it  is  a  newspaper  entered 
at  the  postofnce  where  issued. 


127 

§  128.  Reports  of  Dividends  and  Net  Earnings. — In  addition  to 
the  reports  required  by  the  preceding  section,  each  association  shall 
report  to  the  Comptroller  of  the  Currency,  within  ten  days  after 
declaring  any  dividend,  the  amount  of  such  dividend,  and  the 
amount  of  net  earnings  in  excess  of  such  dividend.  Such  re- 
ports shall  be  attested  by  the  oath  of  the  president  or  cashier  of 
the  association.     (Rev.  Stat.  IT.  S.  Sec.  5212.) 

Instructions  as  to  Making  Reports. — 'The  requirement  now  is  that 
regular  reports  must  be  made  on  June  SO  and  December  31  of  each 
year  whether  dividends  are  declared  or  not.  Whenever  a  dividend  is 
declared  between  these  dates  a  complete  report  must  be  made  show- 
ing the  amount  of  the  dividend  and  net  earnings  on  the  day  the  divi- 
dend is  declared,  regardless  of  the  date  of  payment,  and  forwarded 
to  the  Comptroller  within  ten  days  from  date  of  declaration.  The 
Comptroller  mails  blanks  for  regular  semi-annual  reports  to  banks  in 
time  for  making  returns  on  June  30  and  December  31. 

FORM   OF    SPECIAL    NOTIFICATION    OF    DIVIDEND    DECLARED 

Charter  No 

The   ,  located  at   

in  the  State  of  


Capital  Stock  Paid  in,  $ ;   Surplus  Fund,*  $ 

Date  of  declaration, .,.,  192 

Date  payable,   .,  192 

Net  earnings  on  hand  at  date  of  declaration  of  dividend  (including 
earnings  of  this  period  and  balance  of  earnings  remaining  from 
previous  periods) $ 

Less: 

Losses  sustained  and  not  charged  off $ 

Bad  debts  on  hand,  as  defined  by  Sec.  5204,  Rev.  Stat 

Net  profits   carried   to  surplus   fund    (see   Sec.   5199, 

Rev.  Stat.) 

Net  earnings  available  for  dividend $ 

Amount  of  dividend  declared  ( per  cent,  on  capital) 

Net  earnings  available  in  excess  of  dividend $ 


I,  ,  cashier  of  the  above-named 

bank,  do  solemnly  swear  that  the  above  statement  is  true,  and  that  the 

*  Surplus  after  payment  of  dividend  should  be  entered  here. 


128 

lawful  reserve  of  this  bank  on  the  date  of  the  declaration  of  the  divi- 
dend herein  reported  conformed  to  the  requirements  of  Section  19  of 
the  Federal  Reserve  Act,  to  the  best  of  my  knowledge  and  belief. 


Cashier. 
State    of    


>  ss; 


CoUiNTY  OF 

Sworn  to  and  subscribed  before  me  this day  of ,  192 

[seal.]  Notary  Public. 

§  129.  Penalty  for  Failure  to  Make  Reports. — EVery  association 
which  fails  to  make  and  transmit  any  report  required  under  either 
of  the  two  preceding  sections  shall  be  subject  to  a  penalty  of  one 
hundred  dollars  for  each  day  after  the  periods,  respectively,  therein 
mentioned,  that  it  delays  to  make  and  transmit  its  report.  When- 
ever any  association  delays  or  refuses  to  pay  the  penalty  herein 
imposed,  after  it  has  been  assessed  by  the  Comptroller  of  the 
Currency,  the  amount  thereof  may  be  retained  by  the  Treasurer  of 
the  United  States,  upon  the  order  of  the  Comptroller  of  the  Cur- 
rency, out  of  the  interest,  as  it  may  become  due  to  the  associa- 
tion, on  the  bonds  deposited  with  him  to  secure  circulation.  All 
sums  of  money  collected  for  penalties  under  this  section  shall  be 
paid  into  the  Treasury  of  the  United  States.  (Eev.  Stat.  U.  S. 
Sec.  5213.) 

§  130.  Verification  of  Returns  of  National  Banks. —  That  the 
oath  or  affirmation  required  by  section  fifty-two  hundred  and  eleven 
of  the  Eevised  Statutes,  verifying  the  returns  made  by  National 
banks  to  the  Comptroller  of  the  Currency,  when  taken  before  a 
notary  public  properly  authorized  and  commissioned  by  the  State 
in  which  said  notary  resides  and  the  bank  is  located,  or  any  other 
officer  having  an  official  seal,  authorized  in  such  State  to  administer 
oaths,  shall  be  a  sufficient  verification  as  contemplated  by  said 
section  fifty-two  hundred  and  eleven:  Provided,  That  the  officer 
administering  the  oath  is  not  an  officer  of  the  bank.  (Act  Feb. 
26,  1881,  Ch.  82 ;  21  Stat.  L.,  352.) 


129 

§  131.  Appointment,  Powers,  Duties,  Salaries,  etc.,  of  Exam- 
iners.— The  Comptroller  of  the  Currency,  with  the  approval  of  the 
Secretary  of  the  Treasury,  shall  appoint  examiners  who  shall  ex- 
amine every  member  bank  at  least  twice  in  each  calendar  year  and 
of tener  if  considered  necessary :  Provided,  however,  That  the  Fed- 
eral Eeserve  Board  may  authorize  examination  by  the  State  au- 
thorities to  be  accepted  in  the  case  of  State  banks  and  trust  com- 
panies and  may  at  any  time  direct  the  holding  of  a  special  ex- 
amination of  State  banks  or  trust  companies  that  are  stockholders 
in  any  Federal  reserve  bank.  The  examiner  making  the  exami- 
nation of  any  National  bank,  or  of  any  other  member  bank,  shall 
have  power  to  make  a  thorough  examination  of  all  the  affairs  of 
the  bank  and  in  doing  so  he  shall  have  power  to  administer  oaths 
and  to  examine  any  of  the  officers  and  agents  thereof  under  oath 
and  shall  make  a  full  and  detailed  report  of  the  condition  of  said 
bank  to  the  Comptroller  of  the  Currency. 

The  Federal  Reserve  Board,  upon  the  recommendation  of  the 
Comptroller  of  the  Currency,  shall  fix  the  salaries  of  all  bank 
examiners  and  make  report  thereof  to  Congress.  The  expense  of 
the  examinations  herein  provided  for  shall  be  assessed  by  the  Comp- 
troller of  the  Currency  upon  the  banks  examined  in  proportion  to 
assets  or  resources  held  by  the  banks  upon  the  dates  of  examina- 
tion of  the  various  banks.  (Sec.  5240,  U.  S.  Eev.  Stat.,  as  amended 
by  Sec.  21  of  the  Federal  Reserve  Act.) 

Examiner  Does  Not  Represent  Bank. — A  National  bank  examiner 
is  in  no  sense  an  agent  or  officer  of  the  bank  he  examines.  He  can 
bind  it  in  no  way  and  can  contract  for  it  in  no  way.  (Carlon  v.  First 
Nat.  Bank,  157  Pac.  Rep.,  809.) 

§  132.  Examiners  Not  to  Disclose  Information. —  (For  the  pro- 
vision of  law  forbidding  examiners  to  disclose  the  names  of  bor- 
rowers or  the  collateral  for  loans,  see  Section  22  of  Federal  Re- 
serve Act,  §288.) 

§  133.  Loans,  Gratuities  and  Commissions  to  Examiners  For- 
bidden.—  (For  the  provision  of  law  forbidding  banks  to  make  loans 
or  grant  gratuities  to  bank  examiners,  see  Section  22  of  Federal 
Reserve  Act,  §288.) 
9 


130 

§  134.  Examinations  by  Federal  Reserve  Board  and  Federal 
Reserve  Banks. —  (For  the  power  of  a  Federal  Eeserve  Bank  to 
examine  a  member  bank,  see  Section  21  of  Federal  Reserve  Act, 
page  300 ;  for  the  like  power  of  the  Federal  Eeserve  Board,  see  Sec- 
tion 11  (a)  of  Federal  Eeserve  Act,  §225.) 

§  135.  Limitation  of  Visitorial  Powers. — No  association  shall  be 
subject  to  any  visitorial  powers  other  than  such  as  are  authorized 
by  this  Title,  or  are  vested  in  the  courts  of  justice.  (Eev.  Stat. 
IT.  S.  Sec.  5241.) 

For  a  somewhat  similar  provision  see  Section  21  of  Federal  Reserve 
Act,  $286. 

Inspection  of  Books  by  Stockholders. — A  stockholder  has  the  right, 
for  proper  purposes,  and  under  reasonable  regulations  as  to  time  and 
place,  to  examine  the  books  of  the  bank;  and  this  right  may  be  en- 
forced by  a  State  Court.  (Guthrie  v.  Harkness,  199  U.  S.,  148.)  And  a 
State  statute  authorizing  stockholders  of  a  corporation  to  inspect  the 
books  thereof  applies  to  a  National  bank  located  in  the  State.  (People 
ex  rel.  Lorge  v.  Consolidated  Nat.  Bank,  105  App.  Div.  (N.  Y.),  409.) 
The  Court  has  power  to  deny  an  inspection  if  demanded  for  an  illegiti- 
mate purpose,  and  may  regulate  the  time  when  the  inspection  may  be 
made;  but  if  the  inspection  is  sought  for  a  legitimate  purpose  and 
application  is  made  to  the  corporation  during  business  hours  the  right 
is  mandatory.  (Id.)  See  also  Woodward  v.  Old  Second  Nat.  Bank,  154 
Mich.,  459,  and  Murray  v.  Walker,  156  Ky.,  536. 


CHAPTER  VII. 

Taxation. 

Section  136.  Tax  on   Circulating   Notes   Secured  by   Deposit  of 
Other  Than  2  Per  Cent.  Bonds. 

137.  Tax  on  Circulating  Notes  Secured  by  Deposit  of  2 

Per  Cent.  Bonds. 

138.  Same  Subject — Panama  Canal  2  Per  Cent.  Bonds. 

139.  Returns  of  Outstanding  Circulation. 

140.  Assessment  if  Return  is  Not  Made. 

141.  Collection  of  Tax  Where  Bank  Fails  to  Pay. 

142.  Refunding  Excess  Tax  Paid. 

143.  Tax  on  Notes  of  Insolvent  Bank  Abated. 

144.  State  Taxation  of  Shares  of  Stock  and  Real  Estate. 

145.  State  Taxation  of  National  Bank  Notes. 

146.  United  States  Bonds  Exempt  from  Taxation. 

147.  Tax  on  Circulation  of  State  Banks,  etc. 

148.  Tax  on  Notes  of  State  Banks,  etc.,  Used  for  Circula- 

tion   and    Paid    Out   by    National   Banks,    State 
Banks,  etc. 

§  136.  Tax  on  Circulating  Notes  Secured  by  Deposit  of  Other 
Than  Two  Per  Cent.  Bonds. — In  lieu  of  all  existing  taxes,  every 
association  shall  pay  to  the  Treasurer  of  the  United  States,  in  the 
months  of  January  and  July,  a  duty  of  one-half  of  one  per  centum 
each  half-year  upon  the  average  amount  of  its  notes  in  circulation. 
(Rev.  Stat.  U.  S.  Sec.  5214.) 

§  137.  Tax  on  Circulating  Notes  Secured  by  Deposit  of  Two 
Per  Cent.  Bonds. —  Every  National  banking  association  having  on 
deposit  as  provided  by  law  bonds  of  the  United  States,  bearing 
interest  at  the  rate  of  two  per  centum  per  annum,  issued  under 

131 


132 

the  provisions  of  this  Act,  to  secure  its  circulating  notes,  shall  pay 
to  the  Treasurer  of  the  United  States,  in  the  months  of  January 
and  July,  a  tax  of  one-fourth  of  one  per  centum,  each  half  year 
upon  the  average  amount  of  such  of  its  notes  in  circulation  as  are 
based  upon  the  deposit  of  said  two  per  cent  bonds;  and  such  taxes 
shall  be  in  lieu  of  existing  taxes  on  its  notes  in  circulation  imposed 
by  section  fifty-two  hundred  and  fourteen  of  the  Revised  Statutes. 
(Rev.  Stat.  U.  S.  Sec.  5214,  as  amended  by  Act  March  14,  1900, 
Sec.  13 ;  31  Stat.  L.,  49.) 

§  138.  Same  Subject — Panama  Canal  Two  Per  Cent.  Bonds. — 

Every  National  banking  association  having  on  deposit,  as  pro- 
vided by  law,  such  bonds  issued  under  the  provisions  of  said  section 
eight  of  said  Act,  approved  June  twenty-eight,  nineteen  hundred 
and  two,  to  secure  its  circulating  notes,  shall  pay  to  the  Treasurer 
of  the  United  States,  in  the  months  of  January  and  July,  a  tax 
of  one-fourth  of  one  per  cent,  each  half  year  upon  the  average 
amount  of  such  of  its  notes  in  circulation  as  are  based  upon  the 
deposit  of  said  two  per  cent,  bonds ;  and  such  taxes  shall  be  in  lieu 
of  existing  taxes  on  its  notes  in  circulation  imposed  by  section  fifty- 
two  hundred  and  fourteen  of  the  Eevised  Statutes.  (Act  Dec.  21, 
1905;  34  Stat.  L.,  5.) 

§  139.  Eeturns  of  Outstanding  Circulation. —  In  order  to  en- 
able the  Treasurer  to  assess  the  duties  imposed  by  the  preceding 
section,  each  association  shall,  within  ten  days  from  the  first  days 
of  January  and  July  of  each  year,  make  a  return,  under  the 
oath  of  its  president  or  cashier,  to  the  Treasurer  of  the  United 
States,  in  such  form  as  the  Treasurer  may  prescribe,  of  the  average 
amount  of  its  notes  in  circulation,!  *  *  *  *  for  the  six  months 
next  preceding  the  most  recent  first  day  of  January  or  July. 
Every  association  which  fails  so  to  make  such  returns  shall  be 
liable  to  a  penalty  of  two  hundred  dollars,  to  be  collected  either 
out  of  the  interest  as  it  may  become  due  such  association  on  the 

t  The  provisions  omitted  here  required  a  return  of  the  average 
amount  of  capital  stock  and  deposits.  These  have  been  rendered  ob- 
solete by  the  repeal  of  the  tax  on  those  items. 

For  full  details  and  instructions  see  Ch.  V,  Part  IV. 


133 

bonds  deposited  with  the  Treasurer,  or,  at  his  option,  in  the  man- 
ner in  which  penalties  are  to  be  collected  of  other  corporations  un- 
der the  laws  of  the  United  States.     (Kev.  Stat.  U.  S.  Sec.  5215.) 

§  140.  Assessment  if  Return  is  Not  Made. — Whenever  any  asso- 
ciation fails  to  make  the  half-yearly  return  required  by  the  preced- 
ing section,  the  duties  to  be  paid  by  such  association  shall  be 
assessed  upon  the  amount  of  notes  delivered  to  such  association  by 
the  Comptroller  of  the  Currency.     (Eev.  Stat.  TJ.  S.  Sec.  5216.) 

It  is  best  for  the  bank  to  make  up  its  own  average,  as  that  made  by 
the  Treasurer  would  necessarily  include  notes  of  the  bank  not  actually 
in  circulation. 

§  141.  Collection  of  Tax  "Where  Bank  Fails  to  Pay.— Whenever 
an  association  fails  to  pay  the  duties  imposed  by  the  three  *  pre- 
ceding sections,  the  sums  due  may  be  collected  in  the  manner  pro- 
vided for  the  collection  of  United  States  taxes  from  other  corpora- 
tions ;  or  the  Treasurer  may  reserve  the  amount  out  of  the  interest, 
as  it  may  become  due,  on  the  bonds  deposited  with  him  by  such 
defaulting  association.     (Eev.  Stat.  U.  S.  Sec.  5217.) 

§  142.  Refunding  Excess  Tax  Paid. — In  all  cases  where  an  as- 
sociation has  paid  or  may  pay  in  excess  of  what  may  be  or  has  been 
found  due  from  it,  on  account  of  the  duty  required  to  be  paid  to 
the  Treasurer  of  the  United  States,  the  association  may  state  an 
account  therefor,  which,  on  being  certified  by  the  Treasurer  of  the 
United  States  and  found  correct  by  the  First  Comptroller  of  the 
Treasury,  shall  be  refunded  in  the  ordinary  manner  by  warrant  on 
the  Treasury.     (Eev.  Stat.  U.  S.  5218.) 

§  143.  Tax  on  Notes  of  Insolvent  Bank  Abated. —  That  when- 
ever and  after  any  bank  has  ceased  to  do  business  by  reason  of 
insolvency  or  bankruptcy,  no  tax  shall  be  assessed  or  collected,  or 
paid  into  the  Treasury  of  the  United  States,  on  account  of  such 

*  The  reference  here  is  to  Rev.  Stat.  U.  S.,  Sections  5214,  5215  and 
5216.     See  above  sections. 


134 

bank,  which  shall  diminish  the  assets  thereof  necessary  for  the  full 
payment  of  all  its  depositors;  and  such  tax  shall  be  abated  from 
such  National  banks  as  are  found  by  the  Comptroller  of  the  Cur- 
rency to  be  insolvent;  and  the  Commissioner  of  Internal  Revenue, 
when  the  facts  shall  so  appear  to  him,  is  authorized  to  remit  so 
much  of  said  tax  against  insolvent  State  and  savings  banks  as  shall 
be  found  to  affect  the  claims  of  their  depositors.  (Act  March  1, 
1879,  Ch.  125,  Sec.  22;  20  Stat.  L.,  351.) 

§  144.  State  Taxation  of  Shares  of  Stock  and  Real  Estate. — > 
Nothing  herein  shall  prevent  all  the  shares  in  any  association  from 
being  included  in  the  valuation  of  the  personal  property  of  the 
owner  or  holder  of  such  shares,  in  assessing  taxes  imposed  by 
authority  of  the  State  within  which  the  association  is  located;  but 
the  Legislature  of  each  State  may  determine  and  direct  the  manner 
and  place  of  taxing  all  the  shares  of  National  banking  associations 
located  within  the  State,  subject  only  to  the  two  restrictions,  that 
the  taxation  shall  not  be  at  a  greater  rate  than  is  assessed  upon 
other  moneyed  capital  in  the  hands  of  individual  citizens  of  such 
State,  and  that  the  shares  of  any  National  banking  association 
owned  by  non-residents  of  any  State  shall  be  taxed  in  the  city  or 
town  where  the  bank  is  located,  and  not  elsewhere.  Nothing  herein 
shall  be  construed  to  exempt  the  real  property  of  associations  from 
either  State,  county  or  municipal  taxes,  to  the  same  extent,  accord- 
ing to  its  value,  as  other  real  property  is  taxed.  (Rev.  Stat.  TJ.  S. 
Sec.  5219.) 

Taxes  Authorized  by  This  Section  Exclusive. — The  taxes  which  the 
States  are  authorized  by  this  section  to  impose  are  exclusive,  and  the 
National  banks  are  not  liable  to  any  other  tax  imposed  under  State 
authority.  (National  State  Bank  of  Oskaloosa  v.  Young,  25  Iowa,  311; 
Owensboro  Nat.  Bank  v.  Owensboro,  173  U.  S.,  664.)  Thus,  a  State 
may  not  tax  the  intangible  property  or  franchise  of  a  National  bank. 
(Owensboro  Nat.  Bank  v.  Owensboro,  supra.) 

Taxes  Upon  the  Shares — Difference  Between  Shares  and  Capital 
Stock. — The  personal  property  of  a  National  bank  can  not  be  directly 
assessed  for  taxation  by  State  authority.  (City  and  County  of  San 
Francisco  v.  Crocker-Woolworth  Nat.  Bank,  92  Fed.  Rep.,  273.)     The 


135 

taxes  which  the  States  are  authorized  to  impose  are  taxes  upon  the 
shares  of  stock  in  the  hands  of  the  stockholders.  Such  taxes  are  not 
the  same  as  taxes  upon  the  capital  of  the  bank.  (Van  Allen  v.  The 
Assessors,  3  Wall.,  573.)  Where  new  shares  are  issued  they  can  not  be 
taxed  until  the  increase  is  approved  by  the  Comptroller  of  the  Cur- 
rency. (Charleston  v.  People's  Nat.  Bank,  5  S.  C,  103.)  The  shares 
are  taxable  without  regard  to  their  ownership,  and  where  a  National 
bank  owns  stock  in  another  National  bank,  it  may  be  taxed  thereon. 
(Bank  of  Redemption  v.  Boston,  126  U.  S.,  60;  see  also,  Bank  of  Calif. 
v.  Richardson,  248  U.  S.,  476.) 

To  Whom  Assessed. — As  the  tax  can  be  only  on  the  shares  they  must 
be  assessed  to  the  shareholders  in  their  names,  and  not  in  the  name  of 
the  bank.  (Miller  v.  First  Nat.  Bank  of  Cincinnati,  46  Ohio  St.,  424.) 
And  an  assessment  of  the  capital  stock  as  the  personal  property  of  the 
bank  without  mention  of  the  shareholders  is  void.  (Farmers'  & 
Traders'  Nat.  Bank  v.  Hoffman,  93  Iowa,  119.)  And  the  shares  can  not 
be  assessed  in  solido  against  the  bank.  (First  Nat.  Bank  of  Leoti  v. 
Fisher,  45  Kan.,  726;  National  Bank  of  Virginia  v.  City  of  Richmond, 
42  Fed.  Rep.,  877;  Citizens'  Bank  of  Louisiana  v.  Board  of  Assessors, 
52  Fed.  Rep.,  73;  Whitney  Nat.  Bank  v.  Parker,  41  Fed.  Rep.,  402.  But 
see  First  Nat.  Bank  of  Aberdeen  v.  Chehalis  County,  6  Wash.,  64.)  But, 
as  we  shall  see  hereafter,  the  bank  may  be  required  to  pay  the  tax 
for  its  shareholders. 

Meaning  of  the  Teem  "Moneyed  Capital." — The  provision  that  the 
taxation  shall  not  be  at  a  greater  rate  than  is  assessed  upon  other 
moneyed  capital  in  the  hands  of  individual  citizens  is  to  be  construed 
in  the  light  of  the  purpose  and  object  of  Congress.  The  main  purpose 
was  to  render  impossible  for  the  States,  in  levying  taxes,  to  create  and 
foster  an  unequal  and  unfriendly  competition,  by  favoring  institutions 
or  individuals  carrying  on  a  similar  business,  and  operations  and  in- 
vestments of  a  like  character.  The  business  of  banking,  as  defined  by 
law  and  custom,  consists  in  the  issue  of  notes  payable  on  demand,  in- 
tended to  circulate  as  money,  where  the  banks  are  banks  of  issue,  in 
receiving  deposits  payable  on  demand,  in  discounting  commercial  paper, 
making  loans  of  money  on  collateral  security,  buying  and  selling  bills 
of  exchange,  negotiating  loans,  and  dealing  in  negotiable  securities  is- 
sued by  the  Government,  State,  National  and  municipal  and  other  cor- 
porations. These  are  the  operations  in  which  the  capital  invested  in 
National  banks  is  employed,  and  it  is  the  nature  of  that  employment 
which  constitutes  it  in  the  eye  of  this  statute  "moneyed  capital."  Cor- 
porations and  individuals  carrying  on  these  operations  do  come  into 
competition  with  the  business  of  National  banks,  and  capital  thus  em- 


136 

ployed  is  what  is  intended  to  be  described  by  the  act  of  Congress. 
(Mercantile  Nat.  Bank  v.  New  York,  121  U.  S.,  138;  Talbott  v.  Silver 
Bow  County,  139  U.  S.,  438;  Palmer  v.  McMahon,  133  U.  S.,  GGO;  Bank 
of  Redemption  v.  Boston,  125  U.  S.,  60;  First  Nat.  Bank  v.  Chapman, 
173  U.  S.,  205;  Commercial  Nat.  Bank  v.  Chambers,  182  U.  S.,  556.) 

Accordingly,  it  has  been  held  by  the  United  States  Supreme  Court 
that  the  exemption  from  taxation  of  shares  of  stock  in  corporations,  the 
business  of  which  does  not  come  into  competition  with  that  of  the 
National  banks,  is  not  a  discrimination  against  National  banks  within 
the  intendment  of  the  law.  (Mercantile  Nat.  Bank  v.  New  York,  121 
U.  S.,  138.)  Trust  companies  operating  under  the  laws  of  New  York 
are  not  in  any  proper  sense  banking  institutions  within  the  intend- 
ment of  this  section.  (Jenkins  v.  Neff,  186  U.  S.,  230;  s.  c,  163  N.  Y.f 
320.) 

"What  is  Meant  by  "Greater  Rate." — Any  system  of  assessment  of 
taxes  which  exacts  from  the  owner  of  the  shares  of  a  National  bank 
a  larger  sum  in  proportion  to  the  actual  value  of  those  shares  than  it 
does  from  other  moneyed  capital,  valued  in  like  manner,  taxes  the 
shares  at  a  greater  rate,  notwithstanding  that  the  percentage  of  tax  on 
the  valuation  is  the  same  as  that  applied  to  other  moneyed  capital. 
(Pedton  v.  Commercial  Nat.  Bank,  101  U.  S.,  143;  see  also  Whitbeck  v. 
Mercantile  Bank,  127  U.  S.,  193.)  But  the  prohibition  against  dis- 
crimination applies  to  stockholders  of  National  banks  as  a  class,  and 
not  as  individuals,  and  a  scheme  of  taxation  that  is  fair  to  the  class 
will  not  be  held  invalid  because  of  a  particular  case  arising  from  cir- 
cumstances personal  to  the  individual  affected.  (Amoskeag  Savings 
Bank  v.  Purdy,  231  TJ.  S.,  373.)  And  where  there  is  no  discrimination 
against  National  bank  stock  in  favor  of  other  personal  property,  the 
fact  that  the  assessment  for  taxation  upon  personal  estate  is  at  a 
higher  ratio  of  valuation  than  upon  real  estate  is  no  ground  for  the 
intervention  of  a  court  of  equity  at  the  instance  of  a  National  bank. 
(Mercantile  Nat.  Bank  v.  Mayor,  172  N.  Y.,  35.) 

Valuation  of  Shares — What  May  Be  Included  in  Estimating  Val- 
ues.— In  estimating  the  value  of  the  shares,  all  the  property  and  assets 
of  the  bank  may  be  taken  into  consideration  unless  such  property  is 
taxed  separately.  (St.  Louis  Nat.  Bank  v.  Papin,  Fed.  Case  No.  12,239; 
Stafford  Nat.  Bank  v.  Davis,  59  N.  H.,  38.)  And  it  has  been  held  that 
where  shares  are  taxed  at  their  par  value,  the  surplus  fund  may  be 
taxed  separately  if  it  is  not  invested  in  Federal  securities.  (First  Nat. 
Bank  v.  Peterborough,  56  N.  H.,  38;  North  Ward  Nat.  Bank  v.  City  of 
Newark,  39  N.  J.  Law,  380.  But  see  National  State  Bank  v.  Young,  25 
Iowa,  311;    County  Commissioners  v.   Farmers'  and  Mechanics'  Nat 


137 

Bank,  48  Md.,  117.)  If  the  shares  are  assessed  at  their  actual  cash 
value  without  any  deduction  for  real  estate,  the  latter  should  not  be 
taxed  separately.  (Commissioners  of  Rice  County  v.  Citizens'  Nat. 
Bank  of  Faribault,  23  Minn.,  280.)  As  the  tax  is  upon  the  shares  and 
not  upon  the  capital  stock,  it  is  not  necessary  that  any  deduction 
should  be  made  for  that  portion  of  the  capital  which  is  invested  in 
United  States  bonds  or  other  non-taxable  securities.  (Van  Allen  v. 
The  Assessors,  3  Wall.,  573;  Mechanics'  Nat.  Bank  v.  Baker,  65  N.  J. 
Law,  113.)  In  making  a  return  of  the  value  of  its  own  stock  tor  the 
purposes  of  taxation  a  National  bank  can  not  deduct  the  stock  which 
it  holds  in  the  Federal  Reserve  Bank.  (First  Nat.  Bank  of  Cincinnati 
v.  Durr,  246  Fed.  Rep.,  163;  Same  v.  Beaman,  257  Fed.  Rep.,  729.) 

Same  Subject — How  Real  Estate  Treated. — In  fixing  the  actual 
value  of  shares  of  bank  stock  for  the  purpose  of  taxation,  the  real 
estate  of  the  bank  is  to  be  taken  at  its  actual  value,  notwithstanding 
it  is  assessed  at  a  lower  valuation.  (Jenkins  v.  Neff,  163  N.  Y.,  320.) 
Under  the  statutes  of  Indiana  the  real  estate  owned  by  a  National 
bank  is  not  to  be  included  in  the  valuation  of  the  shares  of  stock  for 
purposes  of  taxation.  (Board  of  Commissioners  of  Morgan  County  v. 
First  Nat.  Bank,  57  N.  E.  Rep.,  728.)  But  where  the  real  estate  has 
been  so  included,  and  the  bank  has  also  paid  a  tax  upon  the  real 
estate  as  such,  the  latter  tax  can  not  be  recovered  by  the  bank;  for  the 
wrong  done  was  in  the  over-valuation  of  the  stock,  and  not  in  the 
assessment  of  the  real  estate  to'  the  bank.  {Id.)  As  to  the  rule  in 
New  Jersey,  see  Bank  v.  Williams  (58  N.  J.  Law,  45) ;  Mechanics'  Nat. 
Bank  v.  Baker  (65  N.  J.  Law,  113). 

Exemptions. — In  Adams  v.  Nashville  (95  U.  S.,  19)  it  was  said  by 
the  Supreme  Court,  "the  act  of  Congress  was  not  intended  to  curtail 
the  State  power  on  the  subject  of  taxation.  It  simply  required  that 
capital  invested  in  National  banks  should  not  be  taxed  at  a  greater 
rate  than  like  property  similarly  invested.  It  was  not  intended  to  cut 
off  the  power  to  exempt  particular  kinds  of  property  if  the  legislature 
chose  to  do  so."  Accordingly,  it  has  been  held  by  that  court  that  a 
partial  exemption  of  other  moneyed  capital  will  not  deprive  the  State 
of  the  power  to  levy  a  tax  on  National  bank  sto'ck.  (Hepburn  v.  School 
Directors,  23  Wall.,  480;  see  also  Washington  Nat.  Bank  v.  King  Co.,  9 
Wash.,  607.)  Thus  bonds  issued  by  a  State,  or  under  its  authority,  by 
its  public  municipal  bodies,  although  they  undoubtedly  represent  mon- 
eyed capital,  may  be  exempted  without  this  effect,  since  they  are  not 
ordinarily  the  subject  o'f  taxation.  (Mercantile  Bank  v.  Now  York,  121 
U.  S.,  138.)  So  the  State  may  exempt  savings-bank  deposits  (Id.),  or 
the  credits  of  individuals  such   as   accounts,   promissory  notes,   and 


138 

mortgages.  (First  Nat.  Bank  v.  Chehalis  Co.,  6  Wash.,  64.)  But  all 
exemptions  must  be  founded  upon  just  reason,  and  not  operate  as  an 
unfriendly  discrimination  against  investments  in  National  bank  shares. 
(Id.)  Where  the  exemptions  in  favor  of  other  moneyed  capital  are  so 
palpable  as  to  show  that  there  is  a  serious  discrimination  against 
capital  invested  in  the  shares  of  National  banks,  the  tax  upon  such 
shares  will  be  declared  invalid.  (Boyer  v.  Boyer,  113  U.  S.,  690.)  And 
where  a  tax  is  imposed  on  the  market  value  of  the  shares  of  a  National 
bank  without  allowance  of  any  deduction  for  the  non-taxable  securities 
and  specifically  taxed  property  held  by  the  bank,  and  where  it  is  also 
so  assessed  that  the  owners  of  shares  thus  taxed  are  deprived  of  the 
privilege  allowed  other  moneyed  capitalists  of  deducting  from  the 
amount  of  securities  held  by  them  the  amount  Of  bonds,  securities, 
liquidated  claims  and  demands  due  from  them  respectively  to  others, 
such  a  tax  violates  the  provisions  of  the  Statutes  of  the  United  States, 
and  is  void.  (The  First  Nat.  Bank  of  Richmond  v.  The  City  of  Rich- 
mond, 39  Fed.  Rep.,  389.)  If  in  the  practical  execution  of  a  State  tax 
law  it  is  found  impracticable  to  list  more  than  a  small  portion  of  the 
property  subject  to  taxation,  other  than  National  bank  shares,  the 
National  banks  may  demand  such  forms  of  relief  as  will  protect  the 
shareholders  from  paying  a  greater  rate  of  taxation  than  is  imposed 
on  individual  citizens.  (First  Nat.  Bank  v.  Lindsay,  45  Fed.  Rep., 
619.) 

Deductions—  Stockholders  of  the  National  banks  must  be  allowed 
the  same  deductions  from  the  assessment  against  them  upon  their 
shares  of  stock  that  are  allowed  to  the  other  taxpayers  in  the  State  on 
their  moneyed  capital.  (People  v.  Weaver,  100  U.  S.,  539,  reversing  67 
N.  Y.,  516,  and  overruling  People  v.  Dolan,  36  N.  Y.,  59.)  And  if  the 
owners  of  other  moneyed  capital  are  permitted  to  deduct  from  the 
assessed  value  thereof  the  amount  of  debts  which  they  owe,  the  same 
privilege  must  be  allowed  to  the  holders  of  National  bank  stock.  ( Peo- 
ple v.  Weaver,  100  U.  S.,  539;  Britton  v.  Evansville  Nat.  Bank,  105  U. 
S„  322;  Supervisors  v.  Stanley,  105  U.  S.,  305;  First  Nat.  Bank  of 
Leoti  v.  Fisher,  45  Kans.,  726;  Mercantile  Nat.  Bank  v.  Shields,  59  Fed. 
Rep.,  952.)  And  the  mode  of  assessment  must  be  such  that  these  de- 
ductions can  be  made;  and,  therefore,  an  assessment  of  all  the  shares 
against  the  bank  in  solido  which  would  preclude  such  deductions,  would 
be  void.  (First  Nat.  Bank  v.  City  of  Richmond,  39  Fed.  Rep.,  309.) 
But  it  is  immaterial  that  such  deductions  are  allowed  to  holders  of 
stock  in  railroad,  insurance  and  manufacturing  corporations,  since 
such  stock  is  not  regarded  as  "moneyed  capital."  (Mercantile  Nat. 
Bank  v.  Shields,  59  Fed.  Rep.,  952.) 

Where  the  State  laws  require  National  bank  shares  to  be  assessed 


139 

at  their  real  value,  it  is  not  a  discrimination  against  these  banks  that 
private  banks  are  permitted  to  deduct  their  deposits  from  their  taxable 
assets,  and  this  privilege  is  withheld  from  National  banks,  for  the 
deposits  are  debts  against  the  bank,  and  the  real  value  of  the  shares 
depends  upon  the  value  of  the  bank's  franchise,  capital  and  property 
of  all  kinds,  less  its  debts.  (Engelke  v.  Schlender,  75  Tex.,  559.)  Un- 
der the  statutes  of  Virginia  a  stockholder  in  a  National  bank  is  not 
entitled  to  have  his  indebtedness  deducted  from  the  value  of  his  stock 
before  it  is  assessed.  (Burrows  v.  Smith,  95  Va.,  694.)  As  the  tax  is 
on  the  shares  and  not  on  the  capital,  deductions  can  not  be  made  for 
capital  invested  in  U.  S.  bonds  or  other  non-taxable  securities.  (Van 
Allen  v.  Assessors,  3  Wall.,  573.) 

Flat  Rate  Without  Deductions. — Though  the  State  law  may  allow 
deductions  to  persons  and  corporations  generally,  yet  a  low  flat  rate, 
imposed  upon  the  shares  of  all  banks,  both  State  and  National,  without 
the  right  to  make  deductions  for  debts,  does  not  discriminate  against 
National  banks  and  is  not  invalid  under  the  National  Bank  Act. 
(Amoskeag  Savings  Bank  v.  Purdy,  231  U.  S.,  373;  People  v.  Feitner, 
191  N.  Y.,  88.) 

Non-Taxable  Property. — The  intention  of  Congress  was  that  the  rate 
of  taxation  should  be  the  same  as,  or  not  greater  than,  the  tax  upon 
moneyed  capital,  which  is  subject  and  liable  to  taxation,  and  which 
the  State  has  the  capacity  to  tax.  (People  v.  Commissioners,  4  Wall., 
241;  Lionberger  v.  Rouse,  9  Wall.,  468.)  It  is,  therefore,  no  objection 
to  a  tax  on  National  bank  stock  that,  while  deductions  are  made  from 
the  personal  estates  of  individuals  and  the  capital  of  State  corpora- 
tions for  the  Government  bonds  owned  by  them,  no  such  deduction  is 
made  on  account  of  the  capital  of  National  banks  so  invested,  or  that 
private  bankers  are  allowed  to  deduct  legal  tender  notes,  and  no  such 
deduction  allowed  to  National  banks.  (Adair  v.  Robinson,  6  Tex.,  Civ. 
App.,  275;  People  v.  Commissioners,  supra.)  And  where  a  State  had 
previously  contracted  with  banks  chartered  by  it  that  they  should  not 
be  taxed  above  a  certain  rate,  it  was  held  by  the  Supreme  Court  that 
a  tax  on  National  bank  stock  at  a  greater  rate  was  not  invalid,  if  this 
rate  was  not  greater  than  that  assessed  upon  all  other  moneyed  capital 
within  the  State.     (Lionberger  v.  Rouse,  9  Wall.,  468.) 

Real  Estate  in  Other  States. — The  National  Bank  Act  does  not  re- 
quire that  real  estate  situated  outside  of  the  State  in  which  the  bank 
is  located  shall  be  excluded  in  estimating  the  value  of  the  shares  for 
purposes  of  taxation.  (Commercial  Nat.  Bank  v.  Chambers,  182  U.  S., 
556.) 


140 

Mode  in  Which  State  Banks  Must  Be  Tased.— Where  the  State 
banks  are  taxed  upon  the  capital,  no  tax  can  be  imposed  upon  the 
shares  of  National  banks,  for  as  the  capital  of  the  State  banks  may- 
consist  of  bonds  of  the  United  States  which  are  exempt  from  taxation, 
a  tax  on  capital  is  not  equivalent  to  a  tax  on  shares.  (Van  Allen  v. 
The  Assessors,  3  Wall.,  573;  Bradley  v.  The  People,  4  Wall.,  459.)  But 
though  the  tax  upon  the  State  banks  is  not  eo  nomine  a  tax  on  shares, 
yet  if  it  is  equivalent  to  such  a  tax,  the  shares  in  the  National  banks 
located  in  that  State  may  be  taxed.  (Frazer  v.  Seibern,  16  Ohio  St., 
614;  Van  Slyke  v.  State,  26  Wis.,  655;  Boynoll  v.  State,  25  Wis.,  112.) 
But  Congress  meant  no  more  than  to  require  of  the  States,  as  a  condi- 
tion to  the  exercise  of  the  power  to  tax  the  shares  in  National  banks, 
that  they  should,  as  far  as  they  had  the  capacity,  tax  in  like  manner 
the  shares  of  banks  of  their  own  creation.  (Lionberger  v.  Rouse,  9 
Wall.,  468.)  Therefore,  where  a  State  has  previously  contracted  with 
the  banks  which  it  has  chartered  that  they  should  not  be  taxed  above 
a  certain  rate,  a  tax  upon  National  bank  shares  at  a  greater  rate  is 
not  invalid,  if  this  rate  is  not  greater  than  that  assessed  upon  all  the 
moneyed  capital  within  the  State,  except  that  of  the  State  banks.  {Id.; 
The  City  of  Des  Moines,  205  U.  S.,  503;  Marion  Nat.  Bank  of  Lebanon 
v.  Burton,  and  The  Citizens'  Nat.  Bank  of  Lebanon  v.  Burton,  90  S.  W. 
944.) 

State  Constitution. — 'The  taxation  upon  National  bank  shares  by 
State  must  be  characterized  by  such  equality  and  uniformity  as  is  re- 
quired by  the  State  constitution  for  the  protection  of  individual  citi- 
zens having  moneyed  capital.  (First  Nat.  Bank  v.  Lindsay,  45  Fed. 
Rep.,  619.)  National  and  State  banks  in  Kentucky  are  subject  to 
county  and  municipal  taxation.  (Deposit  Bank  of  Owensboro  v.  Davies 
County,  102  Ky.,  174.)  And  the  acceptance  by  the  banks  of  the  act 
known  as  the  "Hewitt  Law"  does  not  preclude  the  State  from  subject- 
ing them  to  other  modes  of  taxation.     (Id.) 

Taxation  by  Territories. — Although  the  word  "territory"  is  not  men- 
tioned specifically  in  the  statute,  the  Territories  have  the  same  power 
of  taxation  of  National  banks  that  the  States  have.  (Talbott  v.  Silver 
Bow  Co.,  139  U.  S.,  441.) 

Insolvent  National  Bank. — The  personal  property  of  an  insolvent 
National  bank  in  the  hands  of  a  receiver  appointed  by  the  Comptroller 
of  the  Currency  is  exempt  from  taxation  under  State  laws.  (Rosen- 
blatt v.  Johnson,  104  U.  S.,  462;  see  Woodward  v.  Ellsworth,  4  Colo., 
580.)  And  where  a  National  bank  has  become  insolvent  and  the  prop- 
erty representing  the  capital  stock  has  been  swept  away,  no  tax  on  the 


141 

shares  can  be  collected  from  the  receiver  under  a  statute  requiring  a 
tax  to  be  paid  by  the  bank.  (City  of  Boston  v.  Beal,  55  Fed.  Rep.,  26; 
s.  c,  51  Fed.  Rep.,  306.) 

Report  to  Comptroller  Not  Evidence  of  Value  of  Shares. — The 
written  report  of  the  officers  of  a  National  bank  to  the  Comptroller  of 
the  Currency,  made  pursuant  to  Section  5211,  Rev.  St.  U.  S.,  does  not 
purport  to  give  the  actual  or  estimated  value  of  the  bank's  property, 
and  is  incompetent,  alone,  as  a  basis  from  which  to  deduce  the  actual 
value  of  the  bank's  stock.     (Patterson  v.  Plummer,  10  N.  D.,  95.) 

License  Tax. — Neither  the  State  nor  its  municipalities  can  impose  a 
license  or  privilege  tax  upon  the  National  banks.  (State  v.  Clement 
Nat.  Bank,  84  Vt,  167;  Mayor  v.  First  Nat.  Bank,  59  Ga.,  648;  City  of 
Carthage  v.  First  Nat.  Bank,  71  Mo.,  508;  National  Bank  of  Chattanooga 
v.  Mayor,  8  Heiskell  (Tenn.),  814.) 

Collection  of  Taxes. — While  the  tax  is  upon  the  shares  it  is  usually 
collected  from  the  banks,  they  paying  for  their  shareholders.  The 
right  of  the  States  to  collect  the  tax  in  this  manner  has  been  sustained 
by  the  United  States  Supreme  Court.  (National  Bank  v.  Common- 
wealth, 9  Wall.,  353.)  But  the  bank  is  not  absolutely  liable  for  the  tax 
upon  the  shares;  to  render  it  liable  it  must  be  shown  to  have,  or  have 
had,  dividends  or  other  property  belonging  to  the  shareholders.  (Far- 
mers' and  Traders'  Nat.  Bank  v.  Hoffman,  93  Iowa,  191.)  A  State  may 
require  the  officers  of  National  banks  located  within  its  territory  to 
transmit  lists  of  its  stockholders  to  the  taxing  officers  of  the  various 
towns  and  villages  in  which  the  stockholders  who  are  residents  reside. 
(Waite  v.  Dowly,  94  U.  S.,  527;  First  Nat.  Bank  of  Youngstown  v. 
Hughes,  6  Fed.  Rep.,  737.)  And  State  courts  have  jurisdiction  to  com- 
pel the  officers  of  National  banks  by  mandamus  to  exhibit  to  the  county 
assessors  the  list  of  the  shareholders  in  their  banks;  and  to  this  end 
it  is  not  necessary  the  statute  should  be  supplemented  by  State  legis- 
lation. (Paul  v.  McGrau,  3  Wash.  St.,  296.)  Where  a  National  bank 
has  become  insolvent  and  the  property  representing  the  capital  stock 
has  been  swept  away,  no  tax  on  the  shares  can  be  collected  from  the 
receiver  under  a  statute  requiring  the  tax  to  be  paid  by  the  bank.  (City 
of  Boston  v.  Beal,  51  Fed.  Rep.,  306;  s.  c,  55  Fed.  Rep.,  26.) 

Agreement  of  Bank  to  Pay  Taxes. — An  agreement  by  a  National 
bank  to  pay  taxes  on  its  stock  to  it,  and  assessed  at  the  time  against 
the  sellers,  in  consideration  of  being  allowed  to  retain  the  dividends 
and  surplus,  is  not  illegal,  although  the  taxes  are  not  properly  assessed. 
(Lull  v.  Anamosa  Nat.  Bank,  110  Iowa,  537.) 


142 

Tax  Upon  Deposits. — The  rule  that  a  State  can  exercise  no  control 
over  a  National  bank,  except  as  Congress  may  permit,  does  not  prevent 
the  States  from  taxing  the  deposits  therein  against  the  depositors;  and 
the  State  may  make  the  bank  its  agent  to  collect  the  tax.  (State  v. 
Clement  Nat.  Bank,  84  Vt,  167;  Clement  Nat.  Bank  v.  Vermont,  231  U. 
S.,  120.)  And  the  contract  of  a  National  bank,  voluntarily  made  in 
pursuance  of  the  State  Statute,  to  pay  to  the  State  the  tax  deposits,  is 
a  contract  designed  to  promote  the  bank's  interests  in  an  authorized 
branch  of  its  business,  and  is  not  ultra  vires.     (Id.) 

Remedy  for  Illegal  Taxation. — If  the  tax  is  illegal  the  bank  may,  on 
behalf  of  its  stockholders,  maintain  a  suit  to  enjoin  the  collection 
thereof.  (Cummings  v.  National  Bank,  101  U.  S.,  153;  Hills  v.  Ex- 
change Bank,  105  U.  S.,  319;  Pelton  v.  Commercial  Nat.  Bank,  101  U.  S., 
143;  Boyer  v.  Boyer,  113  U.  S.,  143;  Third  Nat.  Bank  v.  Hughes,  76  Fed. 
Rep.,  385.)  But  there  must  be  more  than  a  mere  apprehension  that 
the  National  Bank  Act  will  be  violated.  (First  Nat.  Bank  v.  Albright, 
208  U.  S.,  548.)  The  discrimination  must  be  affirmatively  shown. 
(Amoskeag  Savings  Bank  v.  Purdy,  231  U.  S.,  373.)  Two  banks  against 
the  stock  of  which  separate  assessments  have  been  made  can  not  join 
in  such  a  suit.  (Jones  v.  Rushville  Nat.  Bank,  138  Ind.,  87.)  Where 
there  is  a  tribunal  empowered  to  grant  full  relief  in  such  cases,  an 
injunction  will  not  issue  until  application  shall  have  been  made  to 
such  tribunal.  (Albuquerque  Nat.  Bank  v.  Perea,  147  U.  S.,  87;  First 
Nat.  Bank  v.  Bailey,  15  Mont.,  301.  See  Eaton  v.  Union  County  Nat. 
Bank,  141  Ind.,  136;  Castles  v.  City  of  New  Orleans,  46  La.  Ann.,  542; 
First  Nat.  Bank  v.  Brodhecker,  137  Ind.,  693.)  Where  a  National  bank 
seeks  an  injunction  on  the  ground  of  excessive  valuation  of  its  shares, 
the  sum  admitted  to  be  due  must  be  first  paid  or  tendered.  (Albuquer- 
que Nat.  Bank  v.  Perea,  147  U.  S.,  87.)  A  court  of  equity  may  restrain 
the  sale  of  the  property  of  the  bank  for  taxes  assessed  upon  the  stock 
of  its  shareholders.  (Brown  v.  French,  80  Fed.  Rep.,  166.)  Such  an 
action  may  be  maintained  by  a  receiver.     (Id.) 

§  145.  State  Taxation  of  National  Bank  Notes.— That  circu- 
lating notes  of  National  banking  associations  and  United  States 
legal-tender  notes  and  other  notes  and  certificates  of  the  United 
States,  payable  on  demand  and  circulating  or  intended  to  circulate 
as  currency,  and  gold,  silver,  or  other  coin  shall  be  subject  to 
taxation  as  money  on  hand  or  on  deposit  under  the  laws  of  any 
State  or  Territory:  Provided,  That  any  such  taxation  shall  be 
exercised  in  the  same  manner  and  at  the  same  rate  that  any  such 


143 

State  or  Territory  shall  tax  money  or  currency  circulating  as  money 
within  its  jurisdiction. 

That  the  provisions  of  this  act  shall  not  be  deemed  or  held  to 
change  existing  laws  in  respect  of  the  taxation  of  National  banking 
associations.  (Act  August  13,  1894,  Ch.  281,  Sees.  1  and  2;  28 
Stat.  L.,  278.) 

This  does  not  apply  to  the  bank  issuing  the  notes,  but  to  the  holders 
thereof. 

§  146.  United  States  Bonds  Exempt  from  Taxation. —  All  stocks, 
bonds,  Treasury  notes,  and  other  obligations  of  the  United  States 
shall  be  exempt  from  taxation  by  or  under  State  or  municipal  or 
local  authority.     (Rev.  Stat.  U.  S.  3701.) 

So  far  as  this  section  prohibits  State  taxation  of  legal-tender  notes  it 
was  repealed  by  Act  August  13,  1894.     (See  preceding  section.) 

§  147.  Tax  on  Circulation  of  State  Banks,  etc. — That  every 
person,  firm,  association,  other  than  National  bank  associations, 
and  every  corporation,  State  bank,  or  State  banking  association 
shall  pay  a  tax  of  ten  per  centum  on  the  amount  of  their  own  notes 
used  for  circulation  and  paid  out  by  them.  (Act  Feb.  8,  1875, 
Sec.  19;  18  Stat.  L.,  311.) 

§  148.  Tax  on  Notes  of  State  Banks,  etc.,  "Used  for  Circulation 
and  Paid  Out  by  National  Banks,  State  Banks,  etc. — That  every 
such  person,  firm,  association,  corporation,  State  bank,  or  State 
banking  association,  and  also  every  National  banking  association, 
shall  pay  a  like  tax  of  ten  per  centum  on  the  amount  of  notes  of 
any  person,  firm,  association  other  than  a  National  banking  asso- 
ciation, or  of  any  town,  city,  or  municipal  corporation,  used  for 
circulation  and  paid  out  by  them.  (Act  Feb.  8,  1875,  Sec.  20; 
18  Stat.  L.,  311.) 


CHAPTER  VIII. 
Dissolution  and  Receivership. 

Section  149.  Voluntary  Liquidation. 

150.  Notice  of  Intention  to  Go  into  Liquidation. 

151.  Mode  of  Enforcing  Stockholders'  Liability. 

152.  Appointment  of  Receiver  for  Failure  of  Bank  to  Pay 

Its  Notes. 

153.  Appointment  of  Receiver  Where  Franchise  Forfeited 

— In  Cases  of  Insolvency. 

154.  Duties  and  Powers  of  Receiver — Deposit  of  Funds. 

155.  Advertisement  of  Comptroller  to  Creditors. 

156.  Dividends  to  Creditors. 

157.  Injunction  upon  Receivership. 

158.  Expenses  of  Protest,  Examination  and  Receivership. 

159.  Equities  in  Real  E'state,  etc. — Protection  of — Recom- 

mendation of  Receiver. 

160.  Same  Subject — Approval  of  Comptroller  and  Secre- 

tary of  Treasury. 

161.  Same  Subject — Mode  of  Paying  for  Property. 

162.  Disposition  of  Assets  After  Payment  of  Creditors — 

Agent  for  Stockholders — Mode  of  Distribution. 

163.  Violation  of  National  Bank  Act — How  Determined 

— Penalty  for — Liability  of  Directors. 

164.  Transfers  in  Contemplation  of  Insolvency — Prefer- 

ences. 

§  149.  Voluntary  Liquidation. — Any  association  may  go  into 
liquidation  and  be  closed  by  the  vote  of  its  shareholders  owning 
two-thirds  of  its  stock.     (Rev.  Stat.  IT.  S.  Sec.  5220.) 

For  full  particulars  and  forms  see  Ch.  VIII,  Part  IV. 

144 


145 

Shareholders'  Meeting. — The  owners  of  two-thirds  of  the  stock  may 
vote  to  liquidate  the  bank,  though  they  are  the  directors  and  executive 
officers  thereof,  since  they  owe  no  duty  to  dissenting  minority  stock- 
holders to  continue  the  bank.     (Green  v.  Bennet,  110  N.  W.  Rep.,  108.) 

The  action  must  be  taken  at  a  meeting  of  stockholders  duly  assem- 
bled. The  notice  of  meeting  should  clearly  indicate  the  business  to 
be  transacted.  The  vote  in  favor  of  the  liquidation  must  represent 
two-thirds  of  all  the  stock.  But  shareholders  owning  two-thirds  of  the 
stock  may  place  the  bank  in  liquidation.,  though  this  may  be  contrary 
to  the  wishes,  and  against  the  interests,  of  the  owners  of  the  remainder 
of  the  stock.     (Watkins  v.  National  Bank  of  Lawrence,  51  Kans.,  254.) 

A  person  who,  with  full  knowledge  of  all  the  steps  taken  in  placing 
a  bank  in  liquidation,  receives  and  retains  a  dividend  paid  by  the 
officers  in  control  of  the  liquidating  bank,  will  not  be  heard  to  deny 
the  validity  of  the  liquidation.  (Id.)  See  also  First  Nat.  Bank  of 
€entralia  v.  Marshall,  26  111.  App.,  440,  and  Elwood  v.  First  Nat.  Bank, 
41  Kans.,  475. 

New  Contracts. — After  a  National  bank  has  been  placed  in  liquida- 
tion, its  officers  have  no  authority  to  transact  any  business  in  its  name, 
except  such  as  is  implied  in  the  duty  of  winding  up  its  affairs.  (Rich- 
mond v.  Irons,  121  U.  S.,  27;  Schroder  v.  Manufac.  Nat.  Bank  of  Chi- 
cago, 133  U.  S.,  67;  Moss  v.  Whitzel,  108  Fed.  Rep.,  579.) 

Transfers  of  Stock — Inspection  of  Books. — A  National  bank  in 
liquidation  can  not  be  compelled  to  enter  subsequent  transfers  of  stock 
on  its  books  and  issue  new  certificates  therefor.  (Muir  v.  Citizens' 
National'  Bank,  39  Wash.,  57.)  The  stockholders  may  in  a  proper  case 
by  mandamus  require  the  officers  and  directors  to  exhibit  to  them  the 
books,  papers  and  assets  of  the  bank,  and  permit  them  to  examine  the 
same.     (Matter  of  Tuttle  v.  Iron  Nat.  Bank,  170  N.  Y.,  9.) 

Corporate  Existence. — The  placing  of  the  bank  in  liquidation  does 
not  dissolve  it  as  a  corporation;  but  it  will  continue  to  exist  as  a  body 
corporate  for  the  purpose  of  suing  and  being  sued  until  its  affairs  are 
finally  closed.  (Natl.  Bank  v.  Insurance  Co.,  104  U.  S.,  54;  Ordway  v. 
Central  Nat.  Bank,  47  Md.,  217;  Farmers'  Nat.  Bank  v.  Suther,  28  Okla., 
806;  Planten  v.  Nat.  Nassau  Bank,  174  App.  Div.  (N.  Y.),  254.  But  see 
Hodgson  v.  McKinstry,  3  Kans.  App.,  412.) 

Assets  Become  Trust  Fund. — The  assets  of  a  bank  in  liquidation 

become  a  trust  fund  to  be  administered  for  the  benefit  of  all  creditors 

pro  rata,  and  while  the  bank  retains  its  corporate  existence  and  may 

be  sued,  the  effect  of  a  judgment  obtained  against  it  by  a  creditor  Is 

10 


146 

only  to  fix  the  amount  of  the  debt,  and  the  judgment  plaintiff  can  ac- 
quire no  lien  which  will  give  him  an  advantage  over  other  creditors. 
(Merchants'  Nat.  Bank  v.  National  Bank  of  Lillington,  231  Fed.  Rep., 
556.) 

Receiver. — Where  the  bank  is  insolvent  the  Comptroller  of  the  Cur- 
rency may  appoint  a  receiver  therefor,  notwithstanding  the  stock- 
holders have  voted  to  place  the  bank  in  liquidation.  (Washington 
Nat.  Bank  of  Tacoma  v.  Eckels,  57  Fed.  Rep.,  870.)  And  a  court  of 
competent  jurisdiction  may  appoint  a  receiver  for  a  liquidating  bank, 
where  the  bank  is  insolvent,  or  its  affairs  are  being  mismanaged. 
(Irons  v.  Manufacturers'  Nat.  Bank,  Fed.  Case  NO.  7068;  Elwood  v. 
First  Nat.  Bank,  41  Kans.,  475.  But  see  Watkins  v.  National  Bank  of 
Lawrence,  51  Kans.,  254.) 

Liquidating  Bank  as  Garnishee. — The  right  of  a  creditor  of  a  de- 
positor to  make  the  bank  a  garnishee  is  not  affected  by  the  fact  that 
the  bank  has  gone  into  voluntary  liquidation.  (Birmingham  Nat.  Bank 
v.  Mayer,  104  Ala.,  634.) 

Dividends. — Liquidation  dividends  of  a  National  bank  belong  to  the 
holders  of  shares,  whether  those  shares  be  recorded  upon  the  books  of 
the  bank  or  not,  and  must  be  paid  to  the  holders  of  such  shares  on  de- 
mand. The  negotiability  or  transferable  character  of  the  stock  of  a 
National  bank  depends  upon  the  laws  of  the  United  States,  and  is  not 
affected  by  State  laws.  (Bath  Savings  Institution  v.  Sagadahoc  Nat. 
Bank,  89  Maine,  500.) 

Suits  Against  Directors — Demand. — Where  a  National  bank  goes 
into  voluntary  dissolution,  and  a  resolution  is  adopted  by  more  than 
two-thirds  of  the  shareholders  authorizing  the  appointment  by  the 
stockholders  of  a  committee  to  liquidate  the  affairs  of  the  bank,  a 
stockholder,  in  an  action  in  the  name  of  the  corporation  for  an  ac- 
counting by  directors  for  losses  resulting  from  their  mismanagement, 
wrongful  acts  and  negligence,  need  not  show  a  demand  upon,  and  a 
refusal  by  the  liquidating  committee  to  bring  the  action.  (Planten  v. 
National  Nassau  Bank,  174  App.  Div.  (N.  Y.),  254.)  Nor  is  the  plain- 
tiff in  such  action  required  to  show  a  demand  on  the  stockholders.  {Id.) 

§  150.  Notice  of  Intention  to  Go  into  Liquidation. — Whenever 
a  vote  is  taken  to  go  into  liquidation  it  shall  be  the  duty  of  the 
board  of  directors  to  cause  notice  of  this  fact  to  be  certified,  under 
the  seal  of  the  association,  by  its  president  or  cashier,  to  the  Comp- 
troller of  the  Currency,  and  the  publication  thereof  to  be  made  for 


147 

a  period  of  two  months  in  a  newspaper  published  in  the  city  of 
New  York,  and  also  in  a  newspaper  published  in  the  city  or  town 
in  which  the  association  is  located,  or  if  no  newspaper  is  there 
published,  then  in  the  newspaper  published  nearest  thereto,  that 
the  association  is  closing  up  its  affairs,  and  notifying  the  holders 
of  its  notes  and  other  creditors  to  present  the  notes  and  other 
claims  against  the  association  for  payment.  (Rev.  Stat.  U.  S. 
Sec.  5221.) 

For  full  particulars  see  Ch.  VIII,  Part  IV. 

Date  of  Liquidation. — The  liquidation  takes  effect  on  the  date  speci- 
fied in  the  shareholders'  resolution  and,  if  no  time  is  mentioned  therein 
then  on  the  date  of  the  vote  and  not  on  the  receipt  of  the  notice  by 
the  Comptroller. 

§  151.  Mode  of  Enforcing  Stockholders'  Liability. — That  when 
any  National  banking  association  shall  have  gone  into  liquidation 
under  the  provisions  of  section  five  thousand  two  hundred  and 
twenty  of  said  Statutes,  the  individual  liability  of  the  shareholders 
provided  for  by  section  fifty-one  hundred  and  fifty-one  of  said 
Statutes  may  be  enforced  by  any  creditor  of  such  association,  by 
bill  in  equity  in  the  nature  of  a  creditor's  bill,  brought  by  such 
creditor  on  behalf  of  himself  and  of  all  other  creditors  of  the  as- 
sociation, against  the  shareholders  thereof,  in  any  court  of  the 
United  States  having  original  jurisdiction  in  equity  for  the  dis- 
trict in  which  such  association  may  have  been  located  or  estab- 
lished.   (Act  June  30,  1876,  Ch.  156,  Sec.  2 ;  19  Stat.  L.,  63.) 

This  is  the  only  authorized  procedure  for  enforcing  the  individual 
liability  of  the  shareholders  of  a  National  bank  which  has  gone  into 
voluntary  liquidation.  (Williamson  v.  American  Bank,  109  Fed.  Rep., 
36;  115  Fed.  Rep.,  793.)  The  liability  may  be  enforced  to  pay  notes  is- 
sued by  the  bank  for  money  borrowed  by  it.  (Wyman  v.  Wallace,  201 
U.  S.,  230.)  And  the  creditor  need  not  obtain  judgment  on  the  notes. 
{Id.) 

§  152.  Appointment  of  Receiver  for  Failure  of  Bank  to  Pay  Its 
Notes. —  On  becoming  satisfied,  as  specified  in  sections  fifty-two 


143 

hundred  and  twenty-six  and  fifty-two  hundred  and  twenty-seven, 
that  any  association  has  refused  to  pay  its  circulating  notes  as 
therein  mentioned,  and  is  in  default,  the  Comptroller  of  the  Cur- 
rency may  forthwith  appoint  a  receiver,  and  require  of  him  such 
bond  and  security  as  he  deems  proper.  (Rev.  Stat.  TJ.  S.  Sec. 
5234.) 

§  153.  Appointment  of  Receiver  Where  Franchise  Forfeited — 
In  Cases  of  Insolvency. — That  whenever  any  National  banking 
association  shall  be  dissolved,  and  its  rights,  privileges,  and  fran- 
chises declared  forfeited,  as  prescribed  in  section  fifty-two  hundred 
and  thirty-nine  of  the  Eevised  Statutes  of  the  United  States,  oi* 
whenever  any  creditor  of  any  National  banking  association  shall 
have  obtained  a  judgment  against  it  in  any  court  of  record,  and 
made  application,  accompanied  by  a  certificate  from  the  clerk  of 
the  court  stating  that  such  judgment  has  been  rendered  and  has 
remained  unpaid  for  the  space  of  thirty  days,  or  whenever  the 
Comptroller  shall  become  satisfied  of  the  insolvency  of  the  Na- 
tional banking  association,  he  may,  after  due  examination  of  its 
affairs,  in  either  case,  appoint  a  receiver,  who  shall  proceed  to 
close  up  such  association,  and  enforce  the  personal  liability  of  the 
shareholders,  as  provided  in  section  fifty-two  hundred  and  thirty- 
four  of  said  statutes.  (Act  June  30,  1876,  Ch.  156,  Sec.  1;  19 
Stat.  L.,  63.) 

This  section  is  not  unconstitutional.  (Bushnell  v.  Leland,  164  U.  S., 
684.)  Congress  had  power  to  apply  it  to  banks  in  the  District  of 
Columbia.  (Lyons  v.  Bank  of  Discount,  154  Fed.  Rep.,  391.)  A  debtor 
of  the  bank  cannot  question  the  authority  of  the  receiver.  (Jacobson 
v.  Berry,  135  111.  App.,  415.) 

Decisions  of  Comptroller. — The  decision  of  the  Comptroller  that 
the  bank  is  insolvent  is  final,  and  is  not  reviewable  by  the  courts. 
(Washington  Nat.  Bank  of  Tacoma  v.  Eckels,  57  Fed.  Rep.,  870;  Piatt 
v.  Beebe,  57  N.  Y.,  339;  Wheelock  v.  Ko'st.  77  111.,  296.)  Nor  is  the 
Comptroller's  power  in  this  respect  limited  by  the  authority  given 
to  the  stockholders  under  Rev.  Stat.  U.  S.,  Sec.  5220,  to  place  the  bank 
in  liquidation  (Id.) ;  nor  by  the  act  of  1876,  authorizing  the  appoint- 
ment of  an  "agent"  for  the  stockholders.     (Id.) 


149 

Jurisdiction  of  Courts  to  Appoint  Receiver. — It  has  been  held  in 
several  cases  that  the  power  of  the  Comptroller  to  appoint  a  receiver  is 
not  exclusive,  and  that  a  court  of  equity  of  ccimpetent  jurisdiction  may 
direct  a  receivership  where,  according  to  the  rules  of  equity,  it  may  do' 
so  in  the  case  of  other  corporations.  (Irons  v.  Manufacturers'  Nat. 
Bank,  Fed.  Case  No.  7068;  Wright  v.  Merchants'  Nat.  Bank,  Fed.  Case 
No.  18,084;  King  v.  Pomeroy,  121  Fed.  Rep.,  287.)  A  receiver  so  ap- 
pointed may  enforce  the  individual  liability  of  the  stockholders  for  the 
debts  of  the  bank.  (King  v.  Pomeroy,  121  Fed.  Rep.,  287.)  A  receiver 
may  be  appointed  in  a  proper  case  by  a  Federal  court  for  a  bank  which 
has  gone  into  voluntary  liquidation.  (Richmond  v.  Irons,  121  U.  S., 
27.)  But  the  expenses  of  such  a  receiver  can  not  be  charged  to  the 
stockholders  as  a  part  of  their  statutory  liability.     {Id.) 

Effect  of  Appointment  of  Receiver. — The  failure  of  a  bank  and  the 
seizure  by  the  Comptroller  of  the  Currency  ends  the  exercise  of  volition 
by  the  officers  of  the  bank,  suspends  the  payment  of  checks,  matures  all 
demand  notes  held  by  the  bank,  and  applies  to  the  payment  of  such 
notes,  all  balances  on  the  books  of  the  bank,  standing  to'  the  credit  of 
the  makers  of  the  notes.  (Park  Nat.  Bank  of  Chicago  v.  Neblack,  67 
111.  App.,  583.)  But  the  appointment  of  a  receiver  for  a  National  bank 
by  the  Comptroller  of  the  Currency  does  not  Operate  to  dissolve  the 
corporation.  (Chemical  Nat.  Bank  v.  Hartford  Deposit  Company,  161 
U.  S„  1;  Bank  of  Bethel  v.  Pahquioque  Bank,  14  Wall.,  383;  Chemical 
Nat.  Bank  v.  Hartford  Deposit  Company,  156  111.,  522.) 

Presentment  of  Paper. — Where  a  National  bank  has  been  placed  in 
the  hands  of  a  receiver  paper  payable  at  the  bank  should  be  presented 
at  the  office  of  the  Receiver.  (Hutchison  v.  Crutcher,  98  Tenn.,  421.) 
Where  a  bank  examiner  is  in  charge  the  paper  should  be  presented 
to  him.     (Auten  v.  Manistee  Nat.  Bank,  67  Ark.,  243.) 

Bankruptcy  Law  Does  Not  Apply. — Insolvent  National  banks  can 
be  wound  up  only  in  the  mode  provided  by  the  National  Bank  Act;  the 
Federal  laws  on  bankruptcy  do  not  apply.  (Cook  Co'unty  Nat.  Bank  v. 
United  States,  107  U.  S.,  445.) 

Questioning  Validity  of  Appointment. — The  legality  of  the  appoint- 
ment of  a  receiver  can  not  be  inquired  into  by  the  debtors  or  stock- 
holders of  the  bank  when  sued  by  him;  as  to  them,  the  action  of  the 
Comptroller  in  making  the  appointment  is  conclusive  until  set  aside 
on  the  application  of  the  bank.  (Cadle  v.  Baker,  20  Wall.,  650;  Weitzel 
v.  Brown,  224  Mass.,  190;  Peters  v.  Foster,  56  Hun.,  607;  Young  v. 
Wcmpke,  46  Fed.  Rep.,  354.) 


150 

Supervisory  Power  of  Comptroller. — The  receiver  is  the  instrument 
of  the  Comptroller,  and  is  subject  to  the  general  direction  of  that 
officer  (Kennedy  v.  Gibson,  8  Wall.,  505),  and  may  be  removed  by  the 
Comptroller  at  any  time.  (Kennedy  v.  Gibson,  18  Wall.,  505.)  But 
the  language  of  the  statute  that  the  receiver  shall  act  under  the  di- 
rection of  the  Comptroller  means  no  more  than  that  the  receiver  shall 
be  subject  to  the  direction  of  the  Comptroller;  it  does  not  mean  that 
he  shall  do  no  act  without  special  instructions.  Thus,  he  may  bring 
an  action  to  recover  an  ordinary  debt  due  to  the  bank  without  having 
received  special  instructions  from  the  Comptroller  to  do  so.  (Bank  v. 
Kennedy,  17  Wall.,  19.)  Specific  authority  given  to  a  receiver  to  bring 
an  action  against  a  stockholder  to  recover  an  assessment  is  not  with- 
drawn or  affected  by  a  subsequent  general  authority  to'  compromise  or 
sell  all  the  claims  or  assets  of  the  bank.  (McLain  v.  Rankin,  119  Fed. 
Rep.,  110.) 

§  154.  Duties  and  Powers  of  Beceiver — Deposit  of  Funds. — 

Such  receiver,  under  the  direction  of  the  Comptroller,  shall  take 
possession  of  the  books,  records,  and  assets  of  every  description  of 
such  association,  collect  all  debts,  dues  and  claims  belonging  to  it, 
and,  upon  the  order  of  a  court  of  record  of  competent  jurisdiction, 
may  sell  or  compound  all  bad  or  doubtful  debts,  and,  on  a  like 
order,  may  sell  all  the  real  and  personal  property  of  such  associa- 
tion, on  such  terms  as  the  court  shall  direct ;  and  may,  if  necessary 
to  pay  the  debts  of  such  association,  enforce  the  individual  liability 
of  the  stockholders.  Such  receiver  shall  pay  over  all  money  so 
made  to  the  Treasurer  of  the  United  States,  subject  to  the  order 
of  the  Comptroller,  and  also  make  report  to  the  Comptroller  of  all 
his  acts  and  proceedings:  Provided,  That  the  Comptroller  may, 
if  he  deems  proper,  deposit  any  of  the  money  so  made  in  any 
regular  Government  depositary,  or  in  any  State  or  National  bank 
either  of  the  city  or  town  in  which  the  insolvent  bank  was  located, 
or  of  a  city  or  town  as  adjacent  thereto  as  practicable ;  if  such  de- 
posit is  made  he  shall  require  the  depositary  to  deposit  United. 
States  bonds  or  other  satisfactory  securities  with  the  Treasurer  of 
the  United  States  for  the  safe-keeping  and  prompt  payment  of  the 
money  so  deposited.  Such  depositary  shall  pay  upon  such  money 
interest  at  such  rate  as  the  Comptroller  may  prescribe,  not  less, 
however,  than  two  per  centum  per  annum  upon  the  average  monthly 


151 

amount  of  such  deposits.     (Kev.  Stat.  TJ.  S.  Sec.  5234,  as  amended 
by  Act  May  15,  1916;  39  Stat.  L.,  122.) 

Contracts  of  Receiver. — The  Receiver  can  not  charge  the  estate  of 
the  bank  by  any  executory  contract,  unless  authorized  so  to  do  by  the 
provisions  of  the  law  and  the  order  of  a  court  of  competent  jurisdiction 
obtained  upon  the  terms  of  the  law.  (Ellis  v.  Little,  27  Kans.,  701. 
See  also  People's  State  Bank  of  Lakota  v.  Francis,  8  N.  D.,  369.) 

Sales  by  Receiver. — Before  the  receiver  can  sell  any  of  the  property 
of  the  bank  he  should  have  the  approval  of  the  Comptroller  and  must 
have  an  order  from  a  court  of  competent  jurisdiction;  a  sale  made 
without  such  an  order  is  void.  (Schofield  v.  Baker,  212  Fed.  Rep.,  504; 
Ellis  v.  Little,  27  Kans.,  707.  See  also  In  re  Earle,  92  Fed.  Rep.,  22.) 
Where  the  order  directs  him  to  sell,  he  can  not  exchange  or  trade  the 
property  for  other  property.  (Ellis  v.  Little,  27  Kans.,  707.)  And  an 
order  to  sell  the  personal  and  chattel  property  of  the  bank  will  not 
authorize  him  to  assign  a  contract  with  respect  to  realty.  (Baker  v. 
Schofield,  221  Fed.  Rep.,  322.)  A  sale  made  by  a  Receiver  under  order 
of  a  court  is  to  all  intents  and  purposes  a  judicial  sale.  {In  re  Third 
National  Bank,  4  Fed.  Rep.,  775);  and  the  approval  thereof  by  the 
courts  has  the  force  and  effect  of  a  judgment,  and  such  proceedings 
are  not  subject  to  collateral  attack.  (Schaberg's  Estate  v.  McDonald, 
60  Neb.,  493.)  For  a  case  where  action  was  brought  against  a  Re- 
ceiver for  making  a  wrongful  sale  of  the  bank's  assets,  see  Moss  v. 
Goodhart,  209  Fed.  Rep.,  102. 

Compounding  Debts. — Bad  or  doubtful  debts  due  to  a  National  bank 
can  not  be  compounded  upon  the  order  of  the  Comptroller  of  the  Cur- 
rency; but  for  this  purpose  the  order  of  some  court  of  competent  juris- 
diction is  also  required.  (Case  v.  Small,  10  Fed.  Rep.,  722.)  It  is 
questionable  whether  the  court  has  power  to  authorize  the  compound- 
ing of  the  statutory  liability  of  a  stockholder  in  a  National  bank.  {In 
re  certain  stockholders  of  the  California  National  Bank  of  San  Diego, 
53  Fed.  Rep.,  38;  Butler  v.  Poole,  44  Fed.  Rep„  586.)  And  it  has  been 
held  that  a  judgment  recovered  against  a  stockholder  on  an  assessment 
made  by  the  Comptroller,  although  uncollectible,  is  not  a  "bad  or 
doubtful  debt,"  which  a  court  may  authorize  the  Receiver  to  compound, 
under  Rev.  St.,  Section  5234.  {In  re  Earle,  96  Fed.  Rep.,  678.)  But  a 
receiver  may  enforce  a  compromise  agreement  entered  into  for  the 
settlement  of  a  stockholders'  liability.  (McClain  v.  Rankin,  119  Fed. 
Rep.,  110.)  And  with  the  approval  of  the  Court  that  appointed  him, 
he  may  compromise  a  judgment  debt  of  two  joint  debtors,  where  he 


152 

has  been  unable  to  find  any  property  of  either  of  them,  by  releasing 
the  debtors  on  receiving  from  one  of  them  a  sum  of  money  less  than 
the  amount  of  the  judgment.     (Brooks  v.  Neal,  223  Mass.,  467.) 

Suits  by  and  Against  Receiver. — The  Receiver  may  sue  either  in 
his  o'wn  name  or  in  the  name  of  the  bank.  (National  Bank  v.  Ken- 
nedy, 17  Wall.,  19.)  And  a  creditor  may  bring  suit  either  against  the 
receiver  or  the  bank.  (Bank  of  Bethel  v.  Pahquioque  Bank,  14  Wall., 
833;  Chemical  Nat.  Bank  of  Chicago  v.  Hartford  Deposit  Co.,  156  111., 
522.)  In  the  case  of  ordinary  debts  due  to  the  bank  the  Receiver  may 
bring  a  suit  to  recover  them  without  special  directions  from  the  Comp- 
troller. (Id.)  But  when  the  individual  liability  of  the  stockholders 
is  to  be  enforced,  the  Receiver,  before  beginning  suit,  must  have  the 
direction  of  the  Comptroller.  (Kennedy  v.  Gibson,  8  Wall.,  505;  Bank 
v.  Kennedy,  17  Wall.,  19.)  As  to  the  sufficiency  of  the  Comptroller's 
directions  see  Weitzel  v.  Brown,  224  Mass.,  190;  Bowden  v.  Johnson, 
107  U.  S.,  251. 

Jurisdiction  of  Federal  Court. — The  receiver  of  an  insolvent  Na- 
tional bank  may  bring  suit  in  a  Federal  court  to  collect  assets  of  the 
bank  regardless  Of  the  citizenship  of  the  parties.  (Fisher  v.  Yoder,  53 
Fed.  Rep.,  565;  Linn  County  Nat.  Bank  v.  Crawford,  69  Fed.  Rep.,  532.) 
So,  a  suit  by  the  Receiver  to  enforce  the  individual  liability  of  the 
stockholders  in  a  case  arising  under  the  laws  of  the  United  States,  and 
where  the  amount  involved  exceeds  $2,000,  is  within  the  jurisdiction  of 
the  United  States  Circuit  Court.  (Thompson  v.  German  Insurance  Co., 
76  Fed.  Rep.,  892.)  See  also  Hot  Springs  Independent  School  District  v. 
First  Nat.  Bank  of  Hot  Springs,  61  Fed.  Rep.,  417;  Auburn  Savings 
Bank  v.  Hayes,  61  Fed.  Rep.,  911.  The  Receiver  is  an  officer  of  the 
United  States  within  the  meaning  of  Section  563,  Rev.  Stat.  U.  S., 
which  gives  the  District  Courts  jurisdiction  of  "all  suits  at  common 
law  brought  by  the  United  States,  or  any  officer  thereof  authorized  by 
law  to  sue."  (Stephens  v.  Bernays,  41  Fed.  Rep.,  401.)  Where  the 
Receiver  takes  a  case  by  appeal  or  writ  of  error  to  the  Supreme  Court 
of  the  United  States,  he  is  not  required  to  give  a  bond  td  answer  in 
damages  and  costs.  (Pacific  Nat.  Bank  v.  Mixter,  114  U.  S.,  462;  Pep- 
per v.  Fidelity  and  Casualty  Co.,  125  Fed.  Rep.,  822.) 

State  Courts — State  Statutes. — The  Receiver  may  sue  in  the  State 
courts.  (Fish  v.  Olin,  76  Vt,  120.)  He  will  not  be  treated  by  the  State 
courts  as  a  foreign  Receiver,  and  can  sue  therein  to  recover  an  assess- 
ment levied  on  the  shareholders  of  a  bank  located  in  another  State. 
(Peters  v.  Foster,  56  Hun.,  607.)  An  action  by  a  Receiver  against  the 
stockholder  is  governed  by  the  State  statute  of  limitations.  (Butler  v. 
Poole,  44  Fed.  Rep.,  586.) 


153 

District  Attorney — State  Statutes. — As  the  Receiver  is  the  agent 
of  the  United  States,  suits  instituted  by  him  should,  under  Section  380, 
Revised  Statutes,  be  conducted  by  the  United  States  district  attorney 
for  the  district,  but  this  provision  is  only  directory,  and  if  the  Receiver 
employs  other  counsel  in  a  suit  against  a  debtor  of  the  bank,  the  de- 
fendant can  not  be  heard  to  make  the  objection  that  this  duty  of  the 
local  officer  of  the  Government  has  been  devolved  upon  another.  (Ken- 
nedy v.  Gibson,  8  Wall.,  498.)  But  United  States  district  attorneys  are 
not  entitled  to  any  compensation,  in  addition  to  their  salaries,  for 
conducting  suits  brought  by  Receivers  of  National  banks.  (Gibson  v. 
Peters,  150  U.  S.,  342.)  The  Receiver  may  at  any  time  dismiss  an 
attorney  employed  by  him,  regularly  or  otherwise,  to  prosecute  claims 
of  the  bank,  and  employ  another  in  his  place,  whom  the  court  will,  by 
order,  substitute  in  the  place  of  the  dismissed  attorney,  except  as  to 
such  cases  as  the  latter  may  have  commenced  and  finished.  (In  re 
Herman,  50  Fed.  Rep.,  517.) 

Receiver  Occupies  Same  Position  as  the  Bank. — Where  a  Receiver 
is  placed  in  charge  of  the  assets  of  a  National  bank,  he  stands,  as  to 
such  assets,  in  the  place  of  the  bank,  and  is  chargeable  with  knowledge 
of  all  facts  known  to  the  bank  affecting  the  character  of  such  assets. 
(People's  State  Bank  of  Lakota  v.  Francis,  8  N.  D.,  369.)  And  he  may 
hot  appropriate  to  the  use  of  the  bank  or  its  creditors  any  seeming 
asset  that  in  equity  and  good  conscience  belongs  to  another,  or  enforce 
against  another  any  claim  which  ought  not  to  be  enforced.  (Skud  v. 
Tillinghast,  195  Fed.  Rep.,  1.) 

Suits  Against  Directors. — Suits  against  the  directors  for  neglect  or 
mismanagement  of  the  affairs  of  the  bank  should  usually  be  brought 
by  the  Receiver,  but  if  the  Receiver  refuses  to  act,  such  suit  may  be 
brought  by  any  shareholder  on  behalf  of  himself  and  the  other  share- 
holders. (Brinkerhoff  v.  Bostwick,  88  N.  Y.,  52.)  See  note  to  $163, 
page  163. 

Power  of  Bank  Examiner  in  Charge  of  Bank. — A  bank  examiner, 
who  takes  charge  of  the  assets  of  a  National  bank  under  the  directions 
ot  the  Comptroller,  is  not  the  agent  for  the  bank  in  such  negotiations 
as  the  bank  may  be  permitted  to  enter  into  with  a  view  to  the  re- 
sumption of  the  business.  (Tecumseh  Nat.  Bank  v.  Chamberlain  Bank- 
ing House,  63  Neb.,  163.) 

Duty  of  Directors  to  Preserve  Assets. — The  duty  of  the  directors 
to  take  the  necessary  steps  to  preserve  the  assets  of  the  bank  does  not 
end  merely  because  a  bank  examiner  has  taken  possession  of  the  bank 
by  direction  of  the  Comptroller  of  the  Currency.     (Robinson  v.  Hall, 


154 

63  Fed.  Rep.,  222.)  Their  duties  as  directors  in  this  regard  do  not 
cease  until  a  Receiver  has  been  appointed.  {Id.)  Thus,  it  would  be 
their  duty  to  see  that  a  mortgage  given  to  the  bank  was  duly  recorded, 
notwithstanding  a  bank  examiner  was  in  charge.     (Id.) 

§  155.  Advertisement  of  Comptroller  to  Creditors. — The  Comp- 
troller shall,  upon  appointing  a  receiver,  cause  notice  to  be  given, 
by  advertisement  in  such  newspaper  as  he  may  direct  for  three 
consecutive  months,  calling  on  all  persons  who  may  have  claims 
against  such  association  to  present  the  same,  and  to  make  legal 
proof  thereof.     (Eev.  Stat.  IT.  S.  Sec.  5235.) 

§  156.  Dividends  to  Creditors. — From  time  to  time,  after  full 
provision  has  been  first  made  for  refunding  to  the  United  States 
any  deficiency  in  redeeming  the  notes  of  such  association,  the 
Comptroller  shall  make  a  ratable  dividend  of  the  money  so  paid 
over  to  Mm  by  such  receiver  on  all  such  claims  as  may  have  been 
proved  to  his  satisfaction  or  adjudicated  in  a  court  of  competent 
jurisdiction,  and,  as  the  proceeds  of  the  assets  of  such  association 
are  paid  over  to  him,  shall  make  further  dividends  on  all  claims 
previously  proved  or  adjudicated;  and  the  remainder  of  the  pro- 
ceeds, if  any,  shall  be  paid  over  to  the  shareholders  of  such  asso- 
ciation, or  their  legal  representatives,  in  proportion  to  the  stock  by 
them  respectively  held.     (Eev.  Stat.  TJ.  S.  Sec.  5236.) 

How  Claims  Established. — The  claims  of  creditors  may  be  proved 
before  the  Receiver  acting  under  the  supervision  of  the  Comptroller, 
or  established  by  suit  against  the  bank.  But  creditors  must  seek  their 
remedy  through  the  Comptroller  in  the  mode  prescribed  by  the  statute; 
they  can  not  proceed  directly  in  their  own  names  against  the  stock- 
holders or  debtors  of  the  bank.  (Kennedy  v.  Gibson,  8  Wall.,  505: 
Bank  of  Bethel  v.  Pahquioque  Bank,  14  Wall.,  383.)  The  decision  of 
the  Receiver  rejecting  a  claim  is  not  final,  but  the  creditor  still  has 
the  right  to  sue  therefor.  (Bethel  v.  Pahquioque  Bank,  10  Wall.,  383.) 
But  a  judgment  only  determines  the  validity  of  the  claim,  and  the 
creditor  must  await  the  pro-rata  distribution  by  the  Comptroller,  and 
can  not  have  execution  on  his  judgment.  (Id.)  A  judgment  against 
the  Receiver  directing  the  manner  in  which  the  assets  of  the  bank 
shall  be  distributed  should  be  certified  by  the  Receiver  to  the  Comp- 
troller of  the  Currency  and  be  paid  in  due  course  of  distribution. 
(Merrill  v.  National  Bank  of  Jacksonville,  173  U.  S.,  131.) 


155 

Interest. — Claims  when  proved  to  the  satisfaction  of  the  Co'mptroller 
are  upon  the  same  footing  as  if  they  had  been  put  in  judgment,  and 
bear  interest  the  same  as  a  judgment.  (National  Bank  of  Common- 
wealth v.  Mechanics'  National  Bank,  94  U.  S.,  437.)  But  a  creditor 
v/ho  has  obtained  a  judgment  against  the  bank  is  not  entitled  to  in- 
terest upon  the  face  of  the  judgment,  but  only  upon  the  amount  of  the 
claim  at  the  date  of  the  failure.  (White  v.  Knox,  111  U.  S.,  784.)  In 
estimating  the  dividends  to  be  paid  out  of  the  assets,  the  value  of  the 
claims  at  the  time  the  insolvency  is  declared  is  to  be  taken  as  the  basis 
of  distribution.  (White  v.  Knox,  111  U.  S.,  784.)  Interest  should  be 
allowed  during  the  period  of  administration  if  the  sum  realized  from 
the  assets  is  sufficient  to  pay  both  principal  and  interest  to  all  creditors 
who  have  established  claims.  (National  Bank  of  Commonwealth  v. 
Mechanics'  Nat.  Bank,  94  U.  S.,  437;  White  v.  Knox,  111  U.  S.,  784.) 
See  also  Chemical  Nat.  Eank  v.  Armstrong,  59  Fed.  Rep.,  372. 

Secured  Creditors — Collaterals. — A  secured  creditor  of  an  insolvent 
National  bank  may  prove  and  receive  dividends  upon  the  face  of  his 
claim  as  it  stood  at  the  time  of  the  declaratidn  of  insolvency,  without 
crediting  either  his  collaterals,  or  his  collections  made  afterwards,  sub- 
ject always  to  the  proviso  that  dividends  must  cease  when  from  them 
and  the  collaterals  realized  the  claim  has  been  paid  in  full.  (Merrill  v. 
National  Bank  of  Jacksonville,  173  U.  S.,  131;  Chemical  Nat.  Bank  v. 
Armstrong,  59  Fed.  Rep.,  372.  See  also  People  v.  Remington,  121  N. 
Y.,  328.) 

Priority — Claims  Due  the  United  States. — The  priority  of  the 
United  States  is  only  for  the  deficiency  in  redeeming  the  notes  of  the 
bank.  (Cook  County  Nat.  Bank  v.  United  States,  107  U.  S.,  445.)  Sec- 
tion 3466,  U.  S.  Rev.  Stat.,  which  gives  the  United  States  a  priority 
for  all  claims  due  it  from  insolvent  debtors,  do'es  not  apply.  (Id.)  As 
against  the  proceeds  of  the  bonds  deposited  to  secure  the  notes  of  the 
bank,  the  United  States  can  set  off  no  claim  except  for  such  deficiency. 
(Id.)  And  the  five  per  cent,  redemption  fund  can  not  be  retained  by 
the  Treasurer  to  pay  taxes  due  to  the  United  States.  (Jackson  v. 
United  States,  20  Ct.  Cls.,  298.)  The  mere  fact  that  a  deposit  of  public 
moneys  was  wrongful,  and  known  to  be  so  by  the  bank,  does  not  give 
a  claim  therefor  priority.  (Lucas  County  v.  Jamison,  170  Fed.  Rep., 
338.) 

Authority  of  the  Comptroller. — Under  Sections  5234  and  5236  of 
the  Revised  Statutes,  the  assets  of  an  insolvent  National  bank  so  col- 
lected by  the  receiver  are  entirely  within  the  control  and  disposition 
of  the  Comptroller  of  the  Currency,  and  the  Receiver  is  without  power 


156 

in  respect  to  the  payment  of  dividends.  The  Receiver  is  the  mere  in- 
strument of  the  Comptroller,  and  is  subject  in  all  respects  to  his  in- 
structions.    (Merrill  v.  National  Bank  of  Jacksonville,  173  U.  S.,  131.) 

Suits  on  Rejected  Claims. — Notwithstanding  the  insolvency  of  a  Na- 
tional bank,  and  the  appointment  of  a  Receiver  by  the  Comptroller  of 
the  Currency,  the  corporation  continues  as  a  legal  entity,  and  an  action 
may  be  maintained  against  it  on  a  claim  rejected  by  the  Receiver. 
(Denton  v.  Baker,  79  Fed.  Rep.,  189.) 

Acceptance  of  Dividends — Estoppel. — The  acceptance  of  dividends 
upon  a  claim  against  an  insolvent  National  bank  as  allowed  by  the 
Comptroller  of  the  Currency  does  not  estop  the  depositor  from  after- 
wards maintaining  an  action  against  such  bank  upon  a  claim  not  cov- 
ered by  such  allowance  of  the  Comptroller.  (Chemical  Nat.  Bank  of 
Chicago  v.  "World's  Columbian  Exposition,  170  111.,  82.) 

§  157.  Injunction  upon  Receivership.-  Whenever  an  association 
against  which  proceedings  have  been  instituted,  on  account  of  any 
alleged  refusal  to  redeem  its  circulating  notes  as  aforesaid,  denies 
having  failed  to  do  so,  it  may,  at  any  time  within  ten  days  after  it 
has  been  notified  of  the  appointment  of  an  agent,  as  provided  in 
section  fifty-two  hundred  and  twenty-seven,  apply  to  the  nearest 
circuit,  or  district,  or  territorial  court  of  the  United  States  to 
enjoin  further  proceedings  in  the  premises;  and  such  court,  after 
citing  the  Comptroller  of  the  Currency  to  show  cause  why  further 
proceedings  should  not  be  enjoined,  and  after  the  decision  of  the 
court  or  finding  of  a  jury  that  such  association  has  not  refused  to 
redeem  its  circulating  notes,  when  legally  presented  in  the  lawful 
money  of  the  United  States,  shall  make  an  order  enjoining  the 
Comptroller,  and  any  receiver  acting  under  his  direction,  from  all 
further  proceedings  on  account  of  such  alleged  refusal.  (Eev.  Stat. 
U.  S.  Sec.  5237.) 

This  section  gives  a  bank  opportunity  to  disprove  mistaken  charges, 
and  a  method  of  stopping  unwarranted  proceedings.  (See  Moss  v. 
Whitzel,  108  Fed.  Rep.,  579.) 

§  158.  Expenses  of  Protest,  Examination  and  Receivership. — * 

All  fees  for  protesting  the  notes  issued  by  any  National  banking 
association  shall  be  paid  by  the  person  procuring  the  protest  to  be 


157 

made,  and  such  association  shall  be  liable  therefor;  but  no  part  of 
the  bonds  deposited  by  such  association  shall  be  applied  to  the  pay- 
ment of  such  fees.  All  expenses  of  any  preliminary  or  other  ex- 
aminations into  the  conditions  of  any  association  shall  be  paid  by 
such  association.  All  expenses  of  any  receivership  shall  be  paid 
out  of  the  assets  of  such  association  before  distribution  of  the 
proceeds  thereof.     (Eev.  Stat.  IT.  S.  Sec.  5238.) 

§  159.  Equities  in  Real  Estate,  etc. — Protection  of — Recom- 
mendation of  Receiver. —  That  whenever  the  receiver  of  any  Na- 
tional bank  duly  appointed  by  the  Comptroller  of  the  Currency, 
and  who  shall  have  duly  qualified  and  entered  upon  the  discharge 
of  his  trust,  shall  find  it  in  his  opinion  necessary,  in  order  to  fully 
protect  and  benefit  his  said  trust,  to  the  extent  of  any  and  all 
equities  that  such  trust  may  have  in  any  property,  real  or  personal, 
by  reason  of  any  bond,  mortgage,  assignment,  or  other  proper  legal 
claim  attaching  thereto,  and  which  said  property  is  to  be  sold  under 
any  execution,  decree  of  foreclosure,  or  proper  order  of  any  court 
of  jurisdiction,  he  may  certify  the  facts  in  the  case,  together  with 
his  opinion  as  to  the  value  of  the  property  to  be  sold,  and  the  value 
of  the  equity  his  said  trust  may  have  in  the  same,  to  the  Comp- 
troller of  the  Currency,  together  with  a  request  for  the  right  and 
authority  to  use  and  employ  so  much  of  the  money  of  said  trust  as 
may  be  necessary  to  purchase  such  property  at  such  sale.  (Act 
March  29,  1886,  Ch.  28,  Sec.  1 ;  24  Stat.  L.,  8.) 

§  160.  Same  Subject — Approval  of  Comptroller  and  Secretary 
of  Treasury. — That  such  request,  if  approved  by  the  Comptroller 
of  the  Currency,  shall  be,  together  with  the  certificate  of  facts  in 
the  case,  and  his  recommendation  as  to  the  amount  of  money  which, 
in  his  judgment,  should  be  so  used  and  employed,  submitted  to  the 
Secretary  of  the  Treasury;  and  if  the  same  shall  likewise  be  ap- 
proved by  him,  the  request  shall  be  by  the  Comptroller  of  the  Cur- 
rency allowed,  and  notice  thereof,  with  copies  of  the  request,  cer- 
tificate of  facts,  and  indorsement  of  approvals,  shall  be  filed  with 
the  Treasurer  of  the  United  States.  (Act  March  29,  188G,  Ch.  28, 
Sec.  2 ;  24  Stat.  L.,  8.) 


158 

§  161.  Same  Subject — Mode  of  Paying  for  Property. —  That 
whenever  any  such  requests  shall  be  allowed  as  hereinbefore  pro- 
vided, the  said  Comptroller  of  the  Currency  shall  be,  and  is,  em- 
powered to  draw  upon  and  from  such  funds  of  any  such  trust  as 
may  be  deposited  with  the  Treasurer  of  the  United  States  for  the 
benefit  of  the  bank  in  interest  to  the  amount  as  may  be  recom- 
mended and  allowed  and  for  the  purpose  for  which  such  allowance 
was  made:  Provided,  however,  That  all  payments  to  be  made  for 
or  on  account  of  the  purchase  of  any  such  property  and  under 
any  such  allowance  shall  be  made  by  the  Comptroller  of  the  Cur- 
rency direct,  with  the  approval  of  the  Secretary  of  the  Treasury, 
for  such  purpose  only  and  in  such  manner  as  he  may  determine  and 
order.     (Act  March  29,  1886,  Ch.  28,  Sec.  3;  24  Stat.  L.,  8.) 

§  162.  Disposition  of  Assets  After  Payment  of  Creditors — Agent 
for  Stockholders — Mode  of  Distribution.— That  whenever  any  as- 
sociation shall  have  been  or  shall  be  placed  in  the  hands  of  a  re- 
ceiver, as  provided  in  section  fifty-two  hundred  and  thirty-four 
and  other  sections  of  the  Revised  Statutes  of  the  United  States, 
and  when,  as  provided  in  section  fifty-two  hundred  and  thirty-six 
thereof,  the  Comptroller  of  the  Currency  shall  have  paid  to  each 
and  every  creditor  of  such  association,  not  including  shareholders 
who  are  creditors  of  such  association,  whose  claim  or  claims  as 
such  creditor  shall  have  been  proved  or  allowed  as  therein  pre- 
scribed, the  full  amount  of  such  claims,  and  all  expenses  of  the 
receivership  and  the  redemption  of  the  circulating  notes  of  such 
association  shall  have  been  provided  for  by  depositing  lawful 
money  of  the  United  States  with  the  Treasurer  of  the  United 
States,  the  Comptroller  of  the  Currency  shall  call  a  meeting  of 
the  shareholders  of  such  association  by  giving  notice  thereof  for 
thirty  days  in  a  newspaper  published  in  the  town,  city,  or  county 
where  the  business  of  such  association  was  carried  on,  or  if  no 
newspaper  is  there  published,  in  the  newspaper  published  nearest 
thereto.  At  such  meeting  the  shareholders  shall  determine  whether 
the  receiver  shall  be  continued  and  shall  wind  up  the  affairs  of  such 
association,  or  whether  an  agent  shall  be  elected  for  that  purpose, 
and  in  so  determining  the  said  shareholders  shall  vote  by  ballot, 


159 

in  person  or  by  proxj%  each  share  of  stock  entitling  the  holder  to 
one  vote,  and  the  majority  of  the  stock  in  value  and  number  of 
shares  shall  be  necessary  to  determine  whether  the  said  receiver 
shall  be  continued,  or  whether  an  agent  shall  be  elected.  In  case 
such  majority  shall  determine  that  the  said  receiver  shall  be  con- 
tinued, the  said  receiver  shall  thereupon  proceed  with  the  execu- 
tion of  his  trust,  and  shall  sell,  dispose  of,  or  otherwise  collect 
the  assets  of  the  said  association,  and  shall  possess  all  the  powers 
and  authority,  and  be  subject  to  all  the  duties  and  liabilities  origi- 
nally conferred  or  imposed  upon  him  by  his  appointment  as  such 
receiver,  so  far  as  the  same  remain  applicable.  In  case  the  said 
meeting  shall,  by  the  vote  of  a  majority  of  the  stock  in  value  and 
number  of  shares,  determine  that  an  agent  shall  be  elected,  the 
said  meeting  shall  thereupon  proceed  to  elect  an  agent,  voting  by 
ballot,  in  person  or  by  proxy,  each  share  of  stock  entitling  the 
holder  to  one  vote,  and  the  person  who  shall  receive  votes  repre- 
senting at  least  a  majority  of  stock  in  value  and  number  shall  bo 
declared  the  agent  for  the  purposes  hereinafter  provided;  and 
whenever  any  of  the  shareholders  of  the  association  shall,  after  the 
election  of  such  agent,  have  executed  and  filed  a  bond  to  the  satis- 
faction of  the  Comptroller  of  the  Currency,  conditioned  for  the 
payment  and  discharge  in  full  of  each  and  every  claim  that  may 
thereafter  be  proved  and  allowed  by  and  before  a  competent  court, 
and  for  the  faithful  performance  of  all  and  singular  the  duties  of 
such  trust,  the  Comptroller  and  the  receiver  shall  thereupon  trans- 
fer and  deliver  to  such  agent  all  the  undivided  or  uncollected  or 
other  assets  of  such  association  then  remaining  in  the  hands  or 
subject  to  the  order  and  control  of  said  Comptroller  and  said  re- 
ceiver, or  either  of  them;  and  for  this  purpose  said  Comptroller 
and  said  receiver  are  hereby  severally  empowered  and  directed  to 
execute  any  deed,  assignment,  transfer,  or  other  instrument  in  writ- 
ing that  may  be  necessary  and  proper ;  and  upon  the  execution  and 
delivery  of  such  instrument  to  the  said  agent  the  said  Comptroller 
and  the  said  receiver  shall  by  virtue  of  this  act  be  discharged  from 
any  and  all  liabilities  to  such  association  and  to  each  and  all  the 
creditors  and  shareholders  thereof.  Upon  receiving  such  deed, 
assignment,  transfer,  or  other  instrument  the  person  elected  such 


160 

agent  shall  hold,  control,  and  dispose  of  the  assets  and  property  of 
such  association  which  he  may  receive  under  the  terms  hereof  for 
the  benefit  of  the  shareholders  of  such  association,  and  he  may  in 
his  own  name,  or  in  the  name  of  such  association,  sue  and  be  sued 
and  do  all  other  lawful  acts  and  things  necessary  to  finally  settle 
and  distribute  the  assets  and  property  in  his  hands,  and  may  sell, 
compromise,  or  compound  the  debts  due  to  such  association,  with 
the  consent  and  approval  of  the  circuit  or  district  court  of  the 
United  States  for  the  district  where  the  business  of  such  associa- 
tion was  carried  on,  and  shall  at  the  conclusion  of  his  trust  render 
to  such  district  or  circuit  court  a  full  account  of  all  his  proceedings, 
receipts,  and  expenditures  as  such  agent,  which  court  shall,  upon 
due  notice,  settle  and  adjust  such  accounts  and  discharge  said  agent 
and  the  sureties  upon  said  bond.  And  in  case  any  such  agent  so 
elected  shall  refuse  to  serve,  or  die,  resign,  or  be  removed,  any  share- 
holder may  call  a  meeting  of  the  shareholders  of  such  association 
in  the  town,  city,  or  village  where  the  business  of  the  said  asso- 
ciation was  carried  on,  by  giving  notice  thereof  for  thirty  days  in 
a  newspaper  published  in  said  town,  city  or  village,  or  if  no  news- 
paper is  there  published,  in  the  newspaper  published  nearest 
thereto,  at  which  meeting  the  shareholders  shall  elect  an  agent, 
voting  by  ballot,  in  person  or  by  proxy,  each  share  of  stock  en- 
titling the  holder  to  one  vote,  and  when  such  agent  shall  have 
received  votes  representing  at  least  a  majority  of  the  stock  in  value 
and  number  of  shares,  and  shall  have  executed  a  bond  to  the  share- 
holders conditioned  for  the  faithful  performance  of  his  duties,  in 
the  penalty  fixed  by  the  shareholders  at  said  meeting,  with  two 
sureties,  to  be  approved  by  a  judge  of  a  court  of  record,  and  file 
said  bond  in  the  office  of  the  clerk  of  a  court  of  record  in  the 
county  where  the  business  of  said  association  was  carried  on,  he 
shall  have  all  the  rights,  powers,  and  duties  of  the  agent  first 
elected  as  hereinbefore  provided.  At  any  meeting  held  as  here- 
inbefore provided  administrators  or  executors  of  deceased  share- 
holders may  act  and  sign  as  the  decedent  might  have  done  if 
living,  and  guardians  of  minors  and  trustees  of  other  persons  may 
so  act  and  sign  for  their  ward  or  wards  or  cestui  qui  trust.  The 
proceeds  of  the  assets  of  property  of  any  such  association  which 


161 

may  be  undisturbed  at  the  time  of  such  meeting  or  may  be  subse- 
quently received  shall  be  distributed  as  follows: 

"First.  To  pay  the  expenses  of  the  execution  of  the  trust  to  the 
date  of  such  payment. 

"Second.  To  repay  any  amount  or  amounts  which  have  been 
paid  in  by  any  shareholder  or  shareholders  of  such  association 
upon  and  by  reason  of  any  and  all  assessments  made  upon  the  stock 
of  such  association  by  the  order  of  the  Comptroller  of  the  Cur- 
rency in  accordance  with  the  provisions  of  the  Statutes  of  the 
United  States;  and, 

"Third.  The  balance  ratably  among  such  stockholders,  in  pro- 
portion to  the  number  of  shares  held  and  owned  by  each.  Such 
distribution  shall  be  made  from  time  to  time  as  the  proceeds  shall 
be  received  and  as  shall  be  deemed  advisable  by  the  said  Comp- 
troller or  said  agent."  (Act  June  30,  1876,  Ch.  156,  Sec.  3,  as 
amended  by  Act  March  2,  1897,  Ch.  354;  29  Stat.  L.,  600.) 


Suit  by  Agent  Against  Directors. — A  stockholder's  agent  may  main- 
tain an  action  against  the  former  directors  of  the  bank  to  recover 
damages  for  losses  occasioned  by  their  violations  of  law.  (McKinnon 
v.  Morse,  177  Fed.  Rep.,  576.) 


§  163.  Violation  of  National  Bank  Act — How  Determined — 
Penalty  For — Liability  of  Directors. — If  the  directors  of  any  Na- 
tional banking  association  shall  knowingly  violate,  or  knowingly 
permit  any  of  the  officers,  agents,  or  servants  of  the  association  to 
violate  any  of  the  provisions  of  this  Title,  all  the  rights,  privileges, 
and  franchises  of  the  association  shall  be  thereby  forfeited.  Such 
violation  shall,  however,  be  determined  and  adjudged  by  a  proper 
circuit,  •  district,  or  territorial  court  of  the  United  States,  in  a 
suit  brought  for  that  purpose  by  the  Comptroller  of  the  Currency, 
in  his  own  name,  before  the  association  shall  be  declared  dissolved. 
And  in  cases  of  such  violation,  every  director  who  participated  in 
or  assented  to  the  same  shall  be  held  liable  in  his  personal  and 
individual  capacity  for  all  damages  which  the  association,  its 
shareholder,  or  any  other  person,  shall  have  sustained  in  con- 
sequence of  such  violation.  (Kev.  Stat.  U.  S.  Sec.  5239.) 
11 


1G2 

When  Bank  Liable  to  Forfeiture. — To  render  a  National  bank 
liable  to  a  forfeiture  of  its  franchises  for  violation  of  law,  the  acts 
must  have  been  committed  by  the  directors,  or  have  been  knowingly- 
permitted  by  them.  (Trenholm,  Comptroller  of  the  Currency  v.  Com- 
mercial Nat.  Bank  of  Dubuque,  38  Fed.  Rep.,  323.)  Violations  of  law 
by  the  executive  officers  or  agents  of  the  bank,  without  the  knowledge 
and  consent  of  the  directors,  do  not  constitute  grounds  for  forfeiting 
the  franchises.  (Id.)  Such  a  suit  is  within  Section  1047,  Rev.  Stat. 
U.  S.,  and  must  be  brought  within  five  years.  (Welles  v.  Graves,  41 
Fed.  Rep.,  459.) 

Liability  of  Directors. — Directors  who  violate  any  of  the  provisions 
of  the  law  can  be  held  personally  liable  for  the  loss  resulting  to  the 
bank  therefrom.  Thus,  where  they  make  a  loan  in  excess  of  one-tenth 
of  the  capital  stock  of  the  bank,  in  violation  of  Section  5200,  Revised 
Statutes,  they  will  be  liable  to  the  bank  for  all  damages  sustained  by 
it  in  consequence  of  such  loan. 

The  degree  of  care  required  of  the  directors  is  that  which  men  of 
ordinary  prudence  would  exercise  under  similar  circumstances,  and  in 
determining  this  the  restrictions  of  the  banking  law  and  the  usages 
of  business  should  be  taken  into  account.  The  question  is  ultimately 
one  of  fact,  to  be  determined  under  all  the  circumstances.  (Briggs  v. 
Spalding,  141  U.  S.,  132;  Movius  v.  Lee,  30  Fed.  Rep.,  298.)  They  are 
entitled  under  the  law  to  commit  the  banking  business,  as  defined,  to 
their  duly  authorized  officers,  but  this  does  not  absolve  them  from  the 
duty  of  reasonable  supervision,  and  they  will  not  be  permitted  to  be 
shielded  from  liability  because  of  igndrance  of  wrong-doing,  if  such  ig- 
norance is  the  result  of  gross  inattention.  (Bowerman  v.  Hamner,  U. 
S.  Supreme  Court,  Oct.,  1918). 

The  directors  of  a  National  bank  should  require  officers  of  their  bank 
to  give  bond,  and  are  personally  liable  for  lo'sses  caused  by  neglect  in 
leaving  the  management  wholly  to  a  cashier  who  had  but  little  property 
and  of  whom  they  required  no  bond.  (Robinson  v.  Hall,  63  Fed.  Rep., 
222.)  A  National  bank  having  suspended  payment  the  directors  issued 
a  circular  stating  that  the  bank  was  entirely  solvent,  and  invited  its 
customers  to  make  deposits  with  it,  to  be  held  as  special  deposits. 
Afterwards  a  Receiver  was  appointed  by  the  Comptroller  of  the  Cur- 
rency, and  the  special  deposits  made  in  pursuance  of  such  invitation 
were  turned  over  to  him:  Held,  That  the  directors  were  individually 
liable  for  the  amount  of  such  deposits.  (Miller  v.  Howard,  95  Term., 
407.) 


163 

If  directors  who  are  depositors  and  who'  know  some  time  before  sus- 
pension that  that  event  is  inevitable,  and  that  the  bank  can  pay  only  a 
percentage  of  its  deposits,  and  yet  check  for  the  whole  of  their  own 
balances,  thereby  diminishing  the  percentage  to  which  the  other 
creditors  would  be  entitled,  they  defraud  to  this  extent  the  creditors 
whose  interests  they  were  relied  upon  to  protect,  and  will  be  held  to 
strict  accountability.  (Robinson  v.  Hall,  63  Fed.  Rep.,  222.)  For  cir- 
cumstances under  which  directors  would  not  be  liable  for  the  acts  of 
the  cashier  in  violation  of  the  banking  law  done  without  their  partici- 
pation or  knowledge,  see  Clews  v.  Barden,  36  Fed.  Rep.,  617. 

It  is  within  the  power  of  the  board  to  give  a  director  a  leave  of  ab- 
sence on  account  of  ill  health,  and  if  frauds  are  committed  during  his 
absence  and  without  his  knowledge,  he  will  not  be  liable  for  them. 
(Briggs  v.  Spaulding,  141  U.  S.,  132.) 

Actions  Against  Directors — How  Brought. — An  action  to  recover 
damages  from  the  directors  for  losses  resulting  from  a  violation  of 
law  may  be  brought,  though  the  Comptroller  of  the  Currency  has  not 
procured  a  forfeiture  of  the  charter.  (Allen  v.  Luke,  141  Fed.  Rep.f 
694;  Stephens  v.  Overstolz,  43  Fed.  Rep.,  465.  But  see  "Welles  v. 
Graves,  41  Fed.  Rep.,  459.)  Where  a  Receiver  has  been  appointed  for 
the  bank,  the  action  should  be  brought  by  him;  for  the  personal  liabil- 
ity of  the  officers  and  directors  is  an  asset  of  the  bank  belonging  equally 
to  all  creditors,  and  must  therefore  be  enforced  by  the  Receiver  for 
their  benefit  in  proportion  to  the  amount  of  their  claims;  and  the 
action  can  not  be  brought  by  a  creditor.  (Boyd  v.  Schneider,  124  Fed. 
Rep.,  239;  Bailey  v.  Mosher,  63  Fed.  Rep.,  488;  Exchange  Bank  v. 
Peters,  45  Fed.  Rep.,  13);  nor  by  the  individual  stockholders.  (Howe 
v.  Barney,  45  Fed.  Rep.,  668.)  But  where  the  Receiver  refuses  to  bring 
an  action  against  negligent  directors  to  recover  the  amount  which  the 
shareholders  have  been  compelled  to  contribute  to  pay  the  debts  of  the 
association,  an  action  against  such  directors  may  be  brought  by  a 
shareholder  on  behalf  of  himself  and  the  other  shareholders.  (Zinn  v. 
Baxter,  65  Ohio  St.,  341.)  And  where  the  receiver  is  a  director,  and 
one  of  the  parties  charged  with  misconduct  and  against  whom  a 
remedy  is  sought,  the  action  may  be  brought  by  a  shareholder  on  be- 
half of  himself  and  the  other  shareholders.  (Brinkerhoff  v.  Bostwick, 
88  N.  Y.,  52.)  Such  an  action  may  be  brought  in  a  State  court.  (Id.) 
But  a  stockholder  can  not  bring  an  action  against  the  directors  for 
losses  caused  by  their  negligence,  unless  he  was  a  stockholder  when 
the  acts  complained  of  were  committed,  and  also  is  such  when  the 
action  is  brought.  (Hanna  v.  Lyon,  179  N.  Y.,  107.)  And,  as  in  the 
case  of  other  stockholders'  actions,  the  stockholders  bringing  the  ac- 


1G4 

tion  must  show  a  demand  upon  the  directors,  or  upon  the  Receiver 
as  the  case  may  be,  or  must  show  that  such  a  demand  would  have  been; 
useless.  (Moss  v.  Goodhart,  47  Mont.,  257.)  But  see  Planten  v.  Nat. 
Nassau  Bank,  174  App.  Div.  (N.  Y.),  254,  for  procedure  where  the 
bank  is  in  liquidation. 

It  has  also  been  held  that  the  depositors  in  a  National  bank  may- 
maintain  an  action  against  the  directors  to  recover  for  losses  caused 
by  the  negligent  performance  of  their  duties  as  such  directors.  (Boyd 
v.  Schneider,  131  Fed.  Rep.,  223;  Welles  v.  Graves,  41  Fed.  Rep.,  459.) 

Right  of  Action  Against  Director  Survives. — The  liability  of  a  di- 
rector for  violations  of  the  provisions  of  the  National  Bank  Act  does 
not  expire  with  his  death,  but  survives  against  his  estate.  The  cause 
of  action  is  ex  contractu  and  not  ex  delicto.  (Williams  v.  Brady,  232 
Fed.  Rep.,  740;  Stevens  v.  Overstolz,  43  Fed.  Rep.,  465;  Allen  v.  Luke, 
141  Fed.  Rep.,  694;  Bates  v.  Dresser,  229  Fed.  Rep.,  772.) 

Whether  Action  in  Equity  or  at  Law — Statutory  Remedy  Not  Ex- 
clusive.— As  to  whether  the  suit  against  the  directors  should  be 
brought  in  equity  or  at  law,  the  authorities  are  not  agreed.  (Free- 
man v.  Jackson,  227  Fed.  Rep.,  688;  Stephens  v.  Overstolz,  43  Fed. 
Rep.,  771;  National  Exchange  Bank  of  Baltimore  v.  Peters,  44  Fed. 
Rep.,  13;  Welles  v.  Graves,  41  Fed.  Rep.,  459;  Rankin  v.  Cooper,  149 
Fed.  Rep.,  1010;  Hirsh  v.  Jones,  56  Fed.  Rep.,  137.)  The  remedy  of 
a  creditor's  suit  given  by  the  statute  is  cumulative  and  not  exclusive. 
(King  v.  Pomeroy,  121  Fed.  Rep.,  287.)  But  see  Yates  v.  Jones  Nat. 
Bank,  206  U.  S.,  15*8;  240  U.  S.  541.  Thus,  it  does  not  preclude  a 
common  law  action  against  the  directors  for  false  and  fraudulent 
representations  made  by  *,hem.  (Prescott  v.  Haughey,  65  Fed.  Rep., 
663.) 

Action  to  Recover  from  Directors  for  ExcEssrvE  Loans. — The  issues 
of  fact  in  such  actions  are  (1)  whether  the  lo'ans  made  were  made  at 
the  time  when  the  person  to  whom  they  were  made  was  already  in- 
debted to  the  bank  in  a  sum  equal  to  one-tenth  of  the  capital  surplus; 
(2)  whether  such  loans  were  knowingly  made  or  assented  to  by  such 
directors;  and  (3)  what  portions  of  the  moneys  so  loaned  were  lost. 
(City  National  Bank  of  Mangum  v.  Crow  et  al.,  27  Okla.,  107.) 

Liability  of  Directors  for  Making  False  Reports. — The  making  and 
publishing  by  a  National  bank  of  the  reports  required  by  statute  are 
not  merely  for  the  information  of  the  Comptroller,  but  are  to  guide 
so  much  of  the  public  as  may  have  occasion  to  act  thereon,  and  one 
who  buys  from  another  stock  in  the  bank  in  reliance  upon  a  false 


165 

report  of  its  condition,  and  suffers  damage  thereby  has  a  right  of 
action  against  any  officer  or  director  who,  knowing  its  falsity,  author- 
izes such  report,  under  Rev.  St.,  Sec.  5239,  which  makes  them  in- 
dividually liable  for  damages  sustained  by  the  association,  its  stock- 
holders, "or  any  other  person."  (Chesborough  v.  "Woo'dworth,  195  Fed. 
Rep.,  875.)  The  liability  of  the  directors  is  several,  and  plaintiff  may 
sue  one  or  more,  but  must  make  out  a  sufficient  case  against  each  one 
to  authorize  a  recovery  against  him,  and,  in  general,  the  detailed  his- 
tory of  the  entire  transaction  and  of  each  defendant's  connection  with 
the  same  is  admissible.  (Id.)  But  the  statute  (Rev.  Stat.  XJ.  S.  Sec. 
5239)  affords  the  only  test  of  liability,  and  hence  it  must  be  shown 
that  the  director  sought  to  be  held  liable  acted  knowingly;  and  it  is 
not  sufficient  that  he  might,  by  the  exercise  of  ordinary  diligence,  have 
acquired  knowledge  of  the  true  condition  of  the  bank.  (Yates  v.  Jones 
Nat.  Bank,  206  U.  S.,  158,  overruling  Smalley  v.  McGraw,  148  Mich., 
394;  Jones  Nat.  Bank  v.  Yates,  240  U.  S.,  541.)  See  also  Taylor  v. 
Thomas,  124  App.  Div.  (N.  Y.),  53.  But  although  the  common  law 
action  of  deceit  does  not  lie  and  the  measure  of  responsibility  is  laid 
down  in  the  National  Bank  Act,  an  action  may  be  maintained  in  the 
State  court  regardless  of  the  form  of  pleading,  if  the  pleading  itself 
satisfies  the  rule  of  responsibility  declared  by  that  act.  (Thomas  v. 
Taylor,  224  U.  S.,  73.) 

There  is  in  effect,  an  intentional  violation  of  a  statute  when  one 
deliberately  refuses  to  examine  that  which  it  is  his  duty  to  examine. 
The  fact  that  a  statement  of  the  condition  of  a  National  bank  is  not 
made  voluntarily,  but  under  order  of  the  Comptroller  of  the  Currency, 
does  not  relieve  the  directors  from  liability  for  false  statements  know- 
ingly made  therein.  Notice  from  the  Comptroller  of  the  Currency  to 
the  directors  to  collect  or  charge  off  certain  assets  is  a  warning  that 
those  assets  are  doubtful;  and  to  disregard  such  a  notice  and  represent 
the  assets  in  a  statement  to  be  good  is  a  violation  of  the  law  and  ren- 
ders the  directors  making  the  statement  liable  for  damages  to  one 
deceived  thereby.     (Thomas  v.  Taylor,  224  U.  S.,  73.) 

Liability  fob  Neglect. — But  there  is  a  liability  on  the  part  of  Na- 
tional bank  directors  for  failure  to  perform  the  duties  which  the  gen- 
eral principles  of  the  law  cast  upon  them  when  they  become  directors, 
distinct  from,  and  in  addition  to,  the  duties  and  liabilities  expressly 
imposed  by  the  statutes.     (Williams  v.  Brady,  232  Fed.  Rep.,  740.) 

§  164.  Transfers  in  Contemplation  of  Insolvency — Preferences. 

— All  transfers  of  the  notes,  bonds,  bills  of  exchange,  or  other  evi- 
dence of  debt  owing  to  any  National  banking  association,  or  of 
deposits  to  its  credit,  all  assignments  of  mortgages,  sureties  on 


166 

real  estate,  or  of  judgments  or  decrees  in  its  favor;  all  deposits 
of  money,  bullion,  or  other  valuable  tiling  for  its  use,  or  for  the 
use  of  any  of  its  shareholders  or  creditors,  and  all  payments  of 
money  to  either,  made  after  the  commission  of  an  act  of  insolvency, 
or  in  contemplation  thereof,  made  with  a  view  to  prevent  the  ap- 
plication of  its  assets  in  the  manner  prescribed  by  this  chapter,  or 
with  a  view  to  the  preference  of  one  creditor  to  another,  except  in 
payment  of  its  circulating  notes,  shall  be  utterly  null  and  void. 
(Rev.  Stat.  U.  S.  Sec.  5242.) 

Meaning  of  "Insolvency." — The  term  in  this  section  has  the  same 
meaning  as  in  the  National  bankrupt  law;  it  does  not  mean  absolute 
inability  to  pay  at  some  future  time,  upon  a  settlement  and  winding 
up  of  the  bank's  affairs,  but  a  present  inability  to  pay  in  the  ordinary 
course  of  business.  (Case  v.  Citizens'  Bank  of  Louisiana,  Fed.  Case 
No.  2489;  Market  Nat.  Bank  v.  Pacific  Nat.  Bank,  30  Hun.  (N.  Y.)  50.) 

"What  Constitutes  a  Preference. — To  bring  a  transfer  of  assets 
within  the  operation  of  this  section,  it  is  not  necessary  that  the  person 
to  whom  they  are  transferred  should  know  of  the  insolvency,  but  it  is 
sufficient  if  the  insolvency  is  in  the  contemplation  of  the  bank  only. 
(National  Security  Bank  v.  Butler,  129  U.  S.,  223.)  But  it  should  ap- 
pear that  the  money  was  paid  in  contemplation  of  insolvency,  for  the 
purpose  of  giving  a  preference,  and  with  a  view  to  preventing  the 
application  of  the  assets  to  the  claims  of  creditors  generally.  (Hays  v. 
Beardsley,  136  N.  Y.,  299.)  It  will  be  presumed  that  any  transfer  of 
assets,  made  after  the  closing  of  the  bank  has  been  determined  upon, 
whereby  any  creditor  obtains  a  preference  over  other  creditors,  was 
made  with  the  intent  to  prefer.  (National  Security  Bank  v.  Price,  22 
Fed.  Rep.,  697.)  See  also  Armstrong  v.  Chemical  Nat.  Bank,  41  Fed. 
Rep.,  234;  Roberts  v.  Hill,  23  Fed.  Rep.,  31;  Bell  v.  Hanover  Nat.  Bank, 
57  Fed.  Rep.,  821;  Price  v.  Coleman,  22  Fed.  Rep.,  694;  McDonald  v. 
Chemical  Bank,  174  U.  S.,  610;  In  re  Armstrong,  41  Fed.  Rep.,  381; 
Hayden  v.  Chemical  Nat.  Bank,  80  Fed.  Rep.,  587. 

Deposits  Made  When  Bank  Insolvent — Recovery  of. — A  depositor 
in  a  National  bank  may  recover  funds  deposited  after  the  bank  has 
become  hopelessly  insolvent.  He  merely  reclaims  his  own  property  ob- 
tained by  fraud.  (Cragie  v.  Hadley,  99  N.  Y.,  131.)  And  the  fact  that 
the  money  deposited  was  not  marked,  and,  by  a  mingling  with  the 
other  funds  of  the  bank,  lost  its  identity,  does  not  affect  the  right  of 
the  depositor  to  recover  in  full,  if  it  can  be  traced  into  the  vault  of 


167 

the  bank,  and  it  appears  that  a  sum  equivalent  thereto'  remained  con- 
tinuously on  hand  in  the  bank  until  removed  by  the  receiver.  (Massey 
v.  Fisher,  62  Fed.  Rep.,  958.)  But  the  moneys  or  paper  deposited  or 
the  proceeds  thereof  must  be  traced  into  the  hands  of  the  receiver. 
(Multnomah  County  v.  Oregon  Nat.  Bank,  61  Fed.  Rep.,  912;  Spokane 
County  v.  Clark,  61  Fed.  Rep.,  538;  Lake  Erie,  etc.,  R.  R.  Co.  v.  In- 
dianapolis Nat.  Bank,  65  Fed.  Rep.,  690.  Compare  San  Diego  County 
v.  California  Nat.  Bank,  52  Fed.  Rep.,  59;  Boone  County  Nat.  Bank  v. 
Latimer,  67  Fed.  Rep.,  27;  Citizens'  Nat.  Bank  v.  Dowd,  35  Fed.  Rep., 
340.) 

Action  of  Replevin. — A  person  claiming  title  to  property  in  the  pos- 
session of  a  receiver  which  has  come  into  his  possession  with  the  pro- 
perty belonging  to  the  bank,  may  maintain  an  action  of  replevin 
therefor.  (Corn  Exchange  Bank  v.  Blye,  101  N.  Y.,  303;  Faber  v.  Ste- 
phens, 35  Fed.  Rep.,  17.) 

Set-off. — This  section  does  not  prohibit  the  allowance  of  any  valid 
set-off,  legal  or  equitable,  which  a  debtor  of  a  bank  may  have  against 
any  obligation  owing  by  him  to  it  at  the  time  of  its  insolvency.  (Arm- 
strong, Receiver,  v.  Warner,  49  Ohio  St.,  376;  Scott  v.  Armstrong,  146 
U.  S„  499.)  A  depositor  may  therefore  set-off  the  amount  of  his  deposit 
against  his  liability  as  maker  of  a  note,  or  as  indorser  of  a  note  if  sued 
separately,  held  by  the  receiver,  though  such  note  had  not  matured 
when  the  bank  was  closed,  and  the  receiver  appointed.  (Scott  v.  Arm- 
strong, 146  U.  S.,  499;  Yardley  v.  Clothier,  49  Fed.  Rep.,  337;  51  Fed. 
Rep.,  506;  Adams  v.  Spokane  Drug  Co.,  57  Fed.  Rep.,  888;  Mercer  v. 
Dyer,  15  Mont.,  317;  Hughitt  v.  Hayes,  136  N.  Y.,  163.)  If,  however, 
the  maker  and  indorser  are  sued  jointly,  the  indorser  can  set-off  the 
amount  of  his  depo'sit  only  upon  proof  that  the  maker  is  insolvent. 
(Id.)  But  the  debtor  of  the  bank  will  not  be  permitted  to  set-off 
against  his  liability  a  claim  against  the  bank  assigned  to  him  after 
the  bank  had  closed  its  doors.  (Venango  Nat.  Bank  v.  Taylor,  56  Pa. 
St.,  14.) 

Against  the  proceeds  of  the  bonds  deposited  to  secure  circulation  the 
United  States  can  set-off  no  claim,  except  for  money  advanced  to  re- 
deem notes.     (Cook  County  Nat.  Bank  v.  United  States,  107  U.  S.,  445.) 

State  Statute — Debt  Due  Savings  Bank. — A  State  statute  directing 
that  deposits  made  by  savings  banks  shall  be  first  paid  out  of  the  assets 
of  an  insolvent  bank  can  have  no  application  to  an  insolvent  National 
bank,  since  such  statute  is  in  conflict  with  the  provisions  of  the  Na- 
tional Bank  Act.  (Davis  v.  The  Elmira  Savings  Bank,  161  U.  S.,  275, 
reversing  s.  c.  142  N.  Y.,  590.)     A  State  statute  forbidding  conveyances 


1G8 

by  insolvent  debtors  for  the  purpose  of  giving  a  preference  applies  to 
such  conveyance  made  to  a  National  bank.  (Traders'  National  Bank  v. 
Chipman,  164  U.  S.,  347.)  Such  a  statute  is  not  in  conflict  with  any 
provisions  of  the  National  bank  act.     (Id.) 

Federal  Question. — The  question  whether  a  savings  bank  which  was 
a  depositor  with  a  National  bank  which  has  become  insolvent  shall  be 
paid  in  full  persuant  to  State  statute  is  a  question  arising  under  the 
laws  of  the  United  States,  and  entitles  the  receiver  of  the  bank  when 
sued  for  such  deposit  to  remove  the  case  into  the  United  States  Cir- 
cuit Court.  (Auburn  Savings  Bank  v.  Hayes,  61  Fed.  Rep.,  911;  see 
also  First  Nat.  Bank  v.  Selden,  120  Fed.  Rep.,  212.) 


CHAPTER  IX. 

Crimes  and  Misdemeanors. 

Section  165.  Unlawfully  Countersigning  Notes. 

166.  Receipt  of  United  States  or  National  Bank  Notes  as 

Security. 

167.  Embezzlement,    Abstraction    and    Misapplication    of 

Bank  Funds — False  Entries. 

168.  Illegal  Certification  of  Check. 

169.  Obligations  of  the  United  States  Defined. 

170.  Forging  and  Counterfeiting  National  Bank  Notes. 

171.  Wrongful  Use  of  Plates,  False  Plates,  Notes,  etc. 

172.  Passing,  Selling,  etc.,  Counterfeits. 

173.  Taking  Impressions  of  Plates,  etc. 

174.  Persons  Having  Impressions,  etc.,  in  their  Possession. 

175.  Buying,  Selling,  etc.,  Counterfeits. 

176.  Issuing,  etc.,  Notes  of  Closed  Banks. 

177.  Receipt  of  Public  Money  When  Not  Authorized  De- 

positary. 

178.  Political  Contributions. 

179.  Restrictions  on  Checks  Less  Than  One  Dollar. 

180.  Imitation  of  National  Bank  Notes — Penalty  for. 

181.  Penalty  for  Mutilating  Notes,  etc. 

182.  Use  of  Title  "National." 

§  165.  Unlawfully  Countersigning  Notes. — No  officer  acting 
under  the  provisions  of  this  Title  shall  countersign  or  deliver  to 
any  association,  or  to  any  other  company  or  person,  any  circulating 
notes  contemplated  by  this  Title,  except  in  accordance  with  the  true 
intent  and  meaning  of  its  provisions.  Every  officer  who  violates 
this  section  shall  be  deemed  guilty  of  a  high  misdemeanor,  and 
shall  be  fined  not  more  than  double  the  amount  so  countersigned 

169 


170 

and  delivered,  and  imprisoned  not  less  than  one  year  and  not  more 
than  fifteen  years.     (Rev.  Stat.  U.  S.  Sec.  5187.) 

This  applies  to  officers  of  the  Government.  No  cases  have  arisen  un- 
der it  since  the  National  banking  law  went  into  force. 

§  166.  Receipt  of  United  States  or  National  Bank  Notes  As 
Security.— No  association  shall  hereafter  offer  or  receive  United 
States  notes  or  National  bank  notes  as  security  or  as  collateral 
security  for  any  loan  of  money,  or  for  a  consideration  agree  to 
withhold  the  same  from  use,  or  offer  or  receive  the  custody  or 
promise  of  custody  of  such  notes  as  security,  or  as  collateral  se- 
curity, or  consideration  for  any  loan  of  money.  Any  association 
offending  against  the  provisions  of  this  section  shall  be  deemed 
guilt}'  of  a  misdemeanor,  and  shall  be  fined  not  more  than  one 
thousand  dollars  and  a  further  sum  equal  to  one-third  of  the 
money  so  loaned.  The  officer  or  officers  of  any  association  who 
shall  make  any  such  loans  shall  be  liable  for  a  further  sum  equal 
to  one-quarter  of  the  money  loaned;  and  any  fine  or  penalty  in- 
curred by  a  violation  of  this  section  shall  be  recoverable  for  the 
benefit  of  the  party  bringing  such  suit.  (Eev.  Stat.  U.  S.  Sec. 
5207.) 

The  provision  of  this  section  was  designed  to  prevent  the  locking  up 
of  money.  It  was  aimed  at  a  favorite  method  of  accomplishing  this  at 
one  time  put  in  practice  in  New  York  city,  and,  perhaps,  elsewhere. 

§  167.  Embezzlement,  Abstraction  and  Misapplication  of  Banks' 
Funds — False  Entries. — Any  officer,  director,  agent,  or  employee 
of  any  Federal  reserve  bank,  or  of  any  member  bank  as  defined 
in  the  Act  of  December  twenty-third,  nineteen  hundred  and  thir- 
teen, known  as  the  Federal  Reserve  Act,  who  embezzles,  abstracts, 
or  wilfully  misapplies  any  of  the  moneys,  funds  or  credits  of  such 
Federal  reserve  bank  or  member  bank,  or  who,  without  authority 
from  the  directors  of  such  Federal  reserve  bank  or  member  bank, 
issues  or  puts  in  circulation  any  of  the  notes  of  such  Federal 
reserve  bank  or  member  bank,  or  who,  without  such  authority, 
issues  or  puts  forth  any  certificate  of  deposit,  draws  any  order 


171 

or  bill  of  exchange,  makes  any  acceptance,  assigns  any  note, 
bond,  draft,  bill  of  exchange,  mortgage,  judgment,  or  decree,  or 
who  makes  any  false  entry  in  any  book,  report,  or  statement  of 
such  Federal  reserve  bank  or  member  bank,  with  intent  in  any 
case  to  injure  or  defraud  such  Federal  reserve  bank  or  member 
bank,  or  any  other  company,  body  politic  or  corporate,  or  any 
individual  person,  or  to  deceive  any  officer  of  such  Federal  re- 
serve bank  or  member  bank,  or  the  Comptroller  of  the  Currency, 
or  any  agent  or  examiner  appointed  to  examine  the  affairs  of 
such  Federal  reserve  bank  or  member  bank,  or  the  Federal  Re- 
serve  Board;  and  every  receiver  of  a  National  banking  associa- 
tion who,  with  like  intent  to  defraud  or  injure,  embezzles,  ab- 
stracts, purloins,  or  wilfully  misapplies  any  of  the  moneys,  funds, 
or  assets  of  his  trust,  and  every  person  who,  with  like  intent, 
aids  or  abets  any  officer,  director,  agent,  employee,  or  receiver 
in  any  violation  of  this  section  shall  be  deemed  guilty  of  a  mis- 
demeanor, and  upon  conviction  thereof  in  any  district  court  of 
the  United  States  shall  be  fined  not  more  than  $5,000  or  shall  be 
imprisoned  for  not  more  than  five  years,  or  both,  in  the  discre- 
tion of  the  court. 

Any  Federal  reserve  agent,  or  any  agent  or  employee  of  such 
Federal  reserve  agent,  or  of  the  Federal  Reserve  Board,  who  em- 
bezzles, abstracts,  or  wilfully  misapplies  any  moneys,  funds,  or 
securities  intrusted  to  his  care,  or  without  complying  with  or  in 
violation  of  the  provisions  of  the  Federal  Reserve  Act,  issues  or 
puts  in  circulation  any  Federal  reserve  notes  shall  be  guilty  of 
a  misdemeanor  and  upon  conviction  in  any  district  court  of  the 
United  States  shall  be  fined  not  more  than  $5,000  or  imprisoned 
for  not  more  than  five  years,  or  both,  in  the  discretion  of  the 
court.    (Rev.  Stat.  U.  S.  Sec.  5209,  as  amended  Act  Sept.  26, 1918.) 

Offense  Must  Come  Within  the  Statute. — Gross  maladministration 
and  inexcusable  breach  of  duty  on  the  part  of  the  officers  of  a  National 
bank  in  its  management,  however  disastrous  to  its  stockholders,  are 
not  punishable  unless  in  violation  of  this  section.  (Prettyman  v. 
United  States,  180  Fed.  Rep.,  30.) 

Intent. — The  wrongful  intent  is  of  the  essence  of  the  offense,  and 
must  be  proved  as  laid.     (Richardson  v.  United  States,  181  Fed.  Rep., 


172 

1.)  Therefore,  a  mere  mistake  in  making  an  entry  is  not  a  violation 
of  this  section.  (United  States  v.  Wilson,  176  Fed.  Rep.,  806.)  An 
intent  to  defraud  or  injure  the  bank  is  an  essential  ingredient  of  every 
offense  specified  in  this  section.  (McKnight  v.  United  States,  115  Fed. 
Rep.,  972;  United  States  v.  Breese,  131  Fed.  Rep.,  916;  United  States  v. 
Wilson,  176  Fed.  Rep.,  806.)  The  intent  is  inferred  from  the  act,  and 
while  such  inference  is  not  conclusive,  it  throws  the  burden  of  proor 
upon  the  defendant.  (United  States  v.  German,  115  Fed.  Rep.,  987; 
United  States  v.  Corbett,  215  U.  S.,  233.)  Evidence  of  a  uniform  sys- 
tem of  falsification  similar  to  that  charged  in  the  indictment  is  ad- 
missible to  show  intent.  (Kettenbach  v.  United  States,  202  Fed.  Rep., 
377.)  Where  the  intent  with  which  the  accused  aided  a  clerk  to  ab- 
stract is  material  the  accused  may  testify  to  his  intent.  (Cummins  v. 
United  States,  232  Fed.  Rep.,  844.) 

Wilful  Misapplication  and  Abstraction. — The  words  "wilfully 
misapplies"  are  new  in  statutes  creating  offenses,  and  they  are  not 
used  in  describing  any  offense  at  common  law.  (United  States  v. 
Britton,  107  U.  S.,  655.)  To  constitute  the  offense  the  misapplication 
must  have  been  for  the  use  or  benefit  of  the  party  charged,  or  of  some 
person  or  company  other  than  the  bank,  with  intent  to  injure  and 
defraud  the  bank,  or  some  other  body  corporate,  or  some  natural 
person.  It  is  something  different  from  the  acts  of  official  maladminis- 
tration referred  to  in  Section  5239.  (United  States  v.  Britton,  107 
U.  S.,  655.)  When  the  funds  or  assets  of  the  bank  are  unlawfully 
taken  from  its  possession,  and  afterward  willfully  misapplied  by  con- 
verting them  to  the  use  of  any  person  other  than  the  bank,  with  intent 
to  injure  and  defraud,  the  offense,  as  described  in  the  statute,  is  com- 
mitted. (United  States  v.  Harper,  33  Fed.  Rep.,  471;  United  States  v. 
Breese,  131  Fed.  Rep.,  915;  Walsh  v.  United  States,  174  Fed.  Rep.,  615.) 
The  act  may  be  done  directly  and  personally,  or  indirectly  through 
the  agency  of  another.  (United  States  v.  Harper,  33  Fed.  Rep.,  471; 
United  States  v.  Fish,  24  Fed.  Rep.,  585.)  For  specific  examples  of  the 
applicability  of  this  section  see  Flickner  v.  United  States,  150  Fed. 
Rep.,  1;  United  States  v.  Heinze,  161  Fed.  Rep.,  425;  183  Fed.  Rep., 
907;  Coffin  v.  United  States,  162  U.  S.,  664;  Dow  v.  United  States,  82 
Fed.  Rep.,  904;  United  States  v.  Steinman,  172  Fed.  Rep.,  913;  United 
States  v.  Norton,  188  Fed.  Rep.,  256;  United  States  v.  Britton,  108  U. 
S.,  199;  United  States  v.  Martindale,  146  Fed.  Rep.,  280;  Pearce  v. 
United  States,  192  Fed.  Rep.,  561.)  It  is  no  defense  that  the  money 
was  afterwards  refunded.  (United  States  v.  Morse,  161  Fed.  Rep.,  423; 
Norton  v.  United  States,  205  Fed.  Rep.,  593.) 

False  Enteies. — Any  entry  on  the  books  of  the  bank  which  is  inten- 


173 

tionally  made  to  represent  what  is  not  true,  with  intent  either  to  de- 
fraud the  bank  or  to  deceive  any  of  those  specified  in  the  act,  is  a 
false  entry  within  the  meaning  of  this  section.  (Agnew  v.  United 
States,  165  U.  S.,  36;  United  States  v.  Harper,  33  Fed.  Rep.,  471.)  The 
entries  may  be  made  either  personally  or  by  direction.  (Agnew  v. 
United  States,  165  U.  S.,  36;  Morse  v.  United  States,  174  Fed.  Rep.,  539; 
United  States  v.  Wilson,  176  Fed.  Rep.,  806;  Richardson  v.  United 
States,  181  Fed.  Rep.,  1;  United  States  v.  Harper,  33  Fed.  Rep.,  471; 
United  States  v.  Allen,  47  Fed.  Rep.,  696;  Scott  v.  United  States,  130 
Fed.  Rep.,  429.)  For  specific  examples  of  the  manner  in  which  the 
courts  have  applied  this  law,  see  United  States  v.  Means,  42  Fed.  Rep., 
599;  United  States  v.  Britton,  107  U.  S.,  655;  United  States  v.  Crecelius, 
34  Fed.  Rep.,  30;  United  States  v.  Graves,  53  Fed.  Rep.,  700;  Graves  v. 
United  States,  165  U.  S.,  323;  Billingsley  v.  United  States,  178  Fed. 
Rep.,  644;  United  States  v.  McClarty,  191  Fed.  Rep.,  523;  Cochran  v. 
United  States,  157  U.  S.,  286;  United  States  v.  Ege,  49  Fed.  Rep.,  852; 
Dow  v.  United  States,  82  Fed.  Rep.,  904;  Cross  v.  North  Carolina,  132, 
U.  S.,  131.)  And  the  statute  does  not  require  that  any  person  should 
have  been  in  fact  defrauded  or  actually  deceived  by  the  false  entry  in 
order  to  make  the  crime  complete;  if  there  was  an  attempt  to  deceive, 
and  the  false  entry  was  knowingly  entered,  and  was  a  false  entry 
which  was  naturally  and  necessarily  calculated  to  mislead,  this  would 
be  sufficient,  in  the  absence  of  contravening  proof,  to  authorize  a  find- 
ing that  the  person  making  it  made  it  with  intent  to  deceive.  (United 
States  v.  Graves,  53  Fed.  Rep.,  700.)  False  entries  in  a  report  to  the 
Comptroller  of  the  Currency  constitute  this  offense.  (United  States  v. 
Hughitt,  45  Fed.  Rep.,  47;  Harper  v.  United  States,  170  Fed.  Rep.,  385; 
United  States  v.  Corbett,  215  U.  S.,  233.)  And  to  leave  a  blank  un- 
filled which  calls  for  an  answer  being  equivalent  to  a  statement  that 
there  is  nothing  to  report  under  this  heading  may  constitute  a  false 
entry.  (Kettenbach  v.  United  States,  202  Fed.  Rep.,  377.  But  see 
United  States  v.  Herrig,  204  Fed.  Rep.,  124.) 


Form  of  Report. — >But  where  the  form  of  report,  as  prescribed  by 
the  Comptroller,  contains  headings  of  "Loans  and  Discounts,"  and  also 
of  "Overdrafts,"  it  is  the  duty  of  the  bank  officer  to  make  his  entries 
in  such  report  in  such  manner  that  each  of  these  headings  shall  truth- 
fully state  the  condition  of  his  bank  as  to  such  heading.  (United 
States  v.  Graves,  53  Fed.  Rep.  ,634.)  The  "liabilities,"  which  are  re- 
quired to  be  stated  in  the  repo'rts  to  the  Comptroller,  include  con- 
tingent as  well  as  absolute  liabilities;  and  hence  an  unmatured  note, 
payment  of  which  at  maturity  is  guaranteed  by  the  bank,  should  be 
included.     (Cochran  v.  United  States,  157  U.  S.,  286.)     A  schedule  on 


174 

the  back  of  a  report  covered  by  the  same  affidavit,  is  a  part  of  the  re- 
port.    (Harper  v.  United  States,  104  S.  W.  Rep.,  673.) 

Aiding  and  Abetting  Commission  of  Offense. — Persons  who  are  not 
officers  or  agents  of  the  bank  may  be  aiders  and  abettors  in  the  viola- 
tion of  this  section.  (Coffin  v.  United  States,  162  U.  S.,  664;  Keliher  v. 
United  States,  193  Fed.  Rep.,  8.)  But  the  words  "any  person,"  as 
used  in  the  statute,  are  not  limited  to  persons  not  connected  with  the 
bank,  but  include  as  well  officers  and  agents  of  a  bank;  and,  therefore, 
one  officer  may  be  properly  convicted  of  aiding  and  abetting  another 
officer.  (Kettenbach  v.  United  States,  202  Fed.  Rep.,  377.)  See  also 
Richardson  v.  United  States,  181  Fed.  Rep.,  1;  United  States  v.  Hillegas, 
176  Fed.  Rep.,  444. 

Wiien  Criminal  Laws  of  State  Applt. — As  the  offense  of  embezzle- 
ment of  the  funds  and  property  of  the  bank  is  provided  for  in  the 
National  banking  law,  an  officer  of  the  bank  can  not  be  indicted  there- 
for under  State  laws,  nor  have  the  State  courts  jurisdiction  of  such 
offense.  (Commonwealth  v.  Ketner,  92  Pa.  St.,  372;  Commonwealth  v. 
Felton,  101  Mass.,  204.)  But  where  the  property  fraudulently  con- 
verted belongs  to  the  customers  of  the  bank,  as,  for  instance,  property 
left  on  special  deposit,  the  criminal  laws  of  the  State  apply.  (State  v. 
Tuller,  34  Conn.,  280;  Commonwealth  v.  Tanney,  97  Mass.,  50.) 

Larceny  of  the  funds  or  property  of  the  bank  is  punishable  under 
State  laws.  (Commonwealth  v.  Barry,  116  Mass.,  1.)  And  an  officer 
of  a  National  bank  may  be  indicted  for  forgery  under  State  laws. 
(Cross  v.  State  of  North  Carolina,  132  U.  S.,  131.)  So'  an  officer  of  the 
bank  may  be  indicted  under  a  State  statute  for  making  false  and 
fraudulent  entries  in  the  books  of  the  bank,  such  offense  amounting 
to  forgery  at  common  law.  (Luberg  v.  Commonwealth,  94  Pa.  St.,  85.) 
But  the  State  courts  have  no  jurisdiction  of  the  crime  of  "false  en- 
tries" as  defined  by  this  section.  (In  re  Eno,  54  Fed.  Rep.,  669.)  A 
State  statute  forbidding  banks  to  receive  deposits  when  the  bank  is  in- 
solvent, and  making  such  action  a  penal  offense  on  the  part  of  the 
officers  of  the  bank,  can  have  no  application  to  National  banks  lo'cated 
in  such  State.  (Easton  v.  State  of  Iowa,  188  U.  S.,  220;  Slaughter  v. 
First  Nat.  Bank,  109  Ala.,  157.) 

Indictment — Fokm  of — Misapplication  of  Assets. — An  indictment 
for  a  misapplication  of  the  funds  of  a  National  bank  must  specify  the 
particulars  of  the  application,  so  as  to  show  the  application  charged 
to  be  a  criminal  misapplication  as  distinguished  from  applications  that 
are  unlawful,  but  not  criminal.  (United  States  v.  Eno,  56  Fed.  Rep., 
218;  United  States  v.  Warner,  26  Fed.  Rep.,  616;  Batchelor  v.  United 


175 

States,  156  U.  S.,  426.)  But  if  the  indictment  describes  specifically  the 
funds  misapplied,  and  the  manner  of  the  misapplication,  it  need  not 
negative  every  possible  theory  consistent  with  an  honest  purpose  in 
the  disposition  of  the  funds  specified.  (Evans  v.  United  States,  153 
U.  S.,  608.)  See  also  Coffin  v.  United  States,  162  U.  S.,  664;  Geiger  v. 
United  States,  162  Fed.  Rep.,  844;  United  States  v.  Northway,  129  U. 
S.,  327;  Breese  v.  United  States,  106  Fed.  Rep.,  680;  United  States  v. 
Smith,  152  Fed.  Rep.,  542;  Keliher  v.  United  States,  193  Fed.  Rep.,  8; 
United  States  v.  Heinze,  218  U.  S.,  532;  Stout  v.  United  States,  227 
Fed.  Rep.,  799;  United  States  v.  Jewett,  84  Fed.  Rep.,  142.) 

Indictment  foe  Making  False  Entries. — In  an  indictment  for  mak- 
ing a  false  entry  in  a  report  to  the  Comptroller  it  is  sufficient  to  aver 
that  the  defendant  made  such  false  entry  in  a  certain  report  of  the 
condition  of  the  bank,  .  .  .  made  to  the  Comptroller  of  the  Cur- 
rency in  accordance  with  the  provisions  of  Section  5211.  (Cochran  v. 
United  States,  157  U.  S.,  286.)  See  also  United  States  v.  French,  57 
Fed.  Rep.,  382;  United  States  v.  Potter,  56  Fed.  Rep.,  83;  Richardson  v. 
United  States,  181  Fed.  Rep.,  1;  Billingsley  v.  United  States,  178  Fed. 
Rep.,  654. 

Indictment — Different  Counts. — Embezzlement,  abstraction,  and 
willful  misapplication  of  the  moneys,  funds,  etc.,  as  described  in  this 
section,  constitute  three  separate  crimes  or  offenses,  which,  under 
Rev.  St.,  Sec.  1024,  may  be  joined  in  one  indictment,  but  must  be 
stated  in  separate  counts.  (United  States  v.  Cadwallader,  59  Fed.  Rep., 
677.)  See  also  United  States  v.  Jewett,  84  Fed.  Rep.,  142;  Simpson  v. 
United  States,  229  Fed.  Rep.,  940;  Prettyman  v.  United  States,  180 
Fed.  Rep.,  30;  United  States  v.  Norton,  188  Fed.  Rep.,  256;  United 
States  v.  Jewett,  84  Fed.  Rep.,  142. 

Agent  in  Liquidation. — This  section  applies  to  an  agent  in  liquida- 
tion appointed  by  tbe  stockholders.  (United  States  v.  Jewett,  84  Fed. 
Rep.,  142.)  But  not  to  a  receiver  appointed  by  the  Comptroller  of  the 
Currency  under  R.  S.,  5234.  He  is  an  officer  of  the  United  States,  not 
an  agent  of  the  bank.     (U.  S.  v.  Weitzel,  246  U.  S.,  533.) 

§  168.  Illegal  Certification  of  Check.—  Any  officer,  director, 
agent,  or  employee  of  any  Federal  reserve  bank  or  member  bank 
who  shall  wilfully  violate  the  provisions  of  this  section,  or  who 
shall  resort  to  any  device,  or  receive  any  fictitious  obligation,  di- 
rectly or  collaterally,  in  order  to  evade  the  provisions  thereof,  or 
who  shall  certify  a  check  before  the  amount  thereof  shall  have 


176 

been  regularly  entered  to  the  credit  of  the  drawer  upon  the  books 
of  the  bank,  shall  be  deemed  guilty  of  a  misdemeanor  and  shall, 
on  conviction  thereof  in  any  district  court  of  the  United  States, 
be  fined  not  more  than  $5,000,  or  shall  be  imprisoned  for  not 
more  than  five  years,  or  both,  in  the  discretion  of  the  court.  (  Act 
July  12,  1882,  Ch.  290,  Sec.  13;  22  Stat.  L.,  162,  as  superseded 
by  Act  Sept.  26,  1918.) 

It  is  not  necessary  that  the  officer  should  himself  deliver  the  check 
to  some  person  outside  of  the  bank,  or  that  he  should  take  any  part 
in  such  delivery;  but  the  offense  would  be  complete  if,  after  he  had 
written  the  certification,  the  actual  delivery  is  made  by  some  clerk  or 
other  officer  without  his  knowledge.  But  the  certification  must  have 
been  willful.  (Potter  v.  United  States,  155  U.  S.,  438.)  But  it  is  not 
essential  to  prove  that  the  defendant  had  knowledge  that  the  false 
certification  was  in  violation  of  the  statute;  if  he  knew  the  facts,  the 
criminal  intent  is  presumed.  (Chadwick  v.  United  States,  141  Fed. 
Rep.,  225.) 

§  169.  Obligations  of  the  United  States  Denned. — The  words 
"obligation  or  other  security  of  the  United  States"  shall  be  held 
to  mean  all  bonds,  certificates  of  indebtedness,  National  bank  cur- 
rency, coupons,  United  States  notes,  Treasury  notes,  gold  certifi- 
cates, silver  certificates,  fractional  notes,  certificates  of  deposit, 
bills,  checks  or  drafts  for  money,  drawn  by  or  upon  authorized 
officers  of  the  United  States,  stamps  and  other  representatives  of 
value,  of  whatever  denomination,  which  have  been  or  may  be  issued 
under  any  act  of  Congress.  (Eev.  Stat.  U.  S.  Sec.  5413;  Act 
March  4,  1909,  Sec.  147;  35  Stat.  L.,  1115.) 

Punishment  fob  Forging  ok  Counterfeiting  Securities. — Whoever, 
with  intent  to  defraud,  shall  falsely  make,  forge,  counterfeit,  or  alter 
any  obligation  or  other  security  of  the  United  States,  shall  be  fined  not 
more  than  five  thousand  dollars  and  imprisoned  not  more  than  fifteen 
years.  (Rev.  Stat.  U.  S.  Sec.  5414;  Act  March  4,  1909,  Sec.  148;  35  Stat. 
U.  S.,  1115.) 

§  170.  Forging  and  Counterfeiting  National  Bank  Notes. — 
Whoever  shall  falsely  make,  forge,  or  counterfeit,  or  cause  or  pro- 
cure to  be  made,  forged  or  counterfeited,  or  shall  willingly  aid  or 


177 

assist  in  falsely  making,  forging  or  counterfeiting,  any  note  in 
imitation  of,  or  purporting  to  be  in  imitation  of,  the  circulating 
notes  issued  by  any  banking  association  now  or  hereafter  author- 
ized and  acting  under  the  laws  of  the  United  States;  or  whoever 
shall  pass,  utter,  or  publish,  or  attempt  to  pass,  utter,  or  publish, 
any  false,  forged,  or  counterfeited  note,  purporting  to  be  issued 
by  any  such  association  doing  a  banking  business,  knowing  the 
same  to  be  falsely  made,  forged,  or  counterfeited;  or  whoever 
shall  falsely  alter,  or  cause  or  procure  to  be  falsely  altered,  or  shall 
willingly  aid  or  assist  in  falsely  altering  any  such  circulating  notes, 
or  shall  pass,  utter,  or  publish,  or  attempt  to  pass,  utter,  or  pub- 
lish as  true,  any  falsely  altered  or  spurious  circulating  note  is- 
sued, or  purporting  to  have  been  issued,  by  any  such  banking 
association,  knowing  the  same  to  be  falsely  altered  or  spurious, 
shall  be  fined  not  more  than  one  thousand  dollars,  and  imprisoned 
not  more  than  fifteen  years.  (Eev.  Stat.  L.,  5415;  Act  March  4, 
1909,  Sec.  149;  35  Stat.  L.,  1115.) 

§  171.  Wrongful  Use   of  Plates—False   Plates,  Notes,  etc.—* 

Whoever  having  control,  custody,  or  possession  of  any  plate,  stone, 
or  other  thing,  or  any  part  thereof,  from  which  has  been  printed, 
or  which  may  be  prepared  by  direction  of  the  Secretary  of  the 
Treasury  for  the  purpose  of  printing,  any  obligation  or  other 
security  of  the  United  States,  shall  use  such  plate,  stone,  or  other 
thing,  or  any  part  thereof,  or  knowingly  suffer  the  same  to  be  used 
for  the  purpose  of  printing  any  such  or  similar  obligation,  or  other 
security,  or  any  part  thereof,  except  as  may  be  printed  for  the  use 
of  the  United  States  by  order  of  the  proper  officer  thereof;  or 
whoever  by  any  way,  art  or  means  shall  make  or  execute  or  cause 
or  procure  to  be  made  or  executed,  or  shall  assist  in  making  or 
executing  any  plate,  stone  or  other  thing  in  the  likeness  of  any 
plate  designed  for  the  printing  of  such  obligation  or  other  security, 
or  whoever  shall  sell  any  such  plate,  stone,  or  other  thing,  or  bring 
into  the  United  States  or  any  place  subject  to  the  jurisdiction 
thereof,  from  any  foreign  place  any  such  plate,  stone,  or  other 
thing,  except  under  the  direction  of  the  Secretary  of  the  Treasury 
or  other  proper  officer,  or  with  any  other  intent,  in  either  case, 
12 


178 

than  that  such  plate,  stone,  or  other  thing  be  used  for  the  printing 
of  the  obligations  or  other  securities  of  the  United  States ;  or  who- 
ever shall  have  in  his  control,  custody,  or  possession  any  plate, 
stone,  or  other  thing  in  any  manner  made  after  or  in  the  similitude 
of  any  plate,  stone,  or  other  thing  from  which  any  such  obliga- 
tion or  other  security  has  been  printed,  with  the  intent  to  use 
such  plate,  stone,  or  other  thing,  or  to  suffer  the  same  to  be  used 
in  forging  or  counterfeiting  any  such  obligation  or  other  security, 
or  any  part  thereof;  or  whoever  shall  have  in  his  possession  or 
custody,  except  under  authority  from  the  Secretary  of  the  Treas- 
ury or  other  proper  officer,  any  obligation  or  other  security,  made 
or  executed,  in  whole  or  in  part,  after  the  similitude  of  any  obliga- 
tion or  other  security  issued  under  the  authority  of  the  United 
States,  with  intent  to  sell  or  otherwise  use  the  same;  or  whoever 
shall  print,  photograph,  or  in  any  other  manner  make  or  execute, 
or  cause  to  be  printed,  photographed,  made  or  executed,  or  shall 
aid  in  printing,  photographing,  making,  or  executing  any  engrav- 
ing, photograph,  print,  or  impression  in  the  likeness  of  any  such 
obligation  or  other  security,  or  any  part  thereof,  or  shall  sell  any 
such  engraving,  photograph,  print,  or  impression,  except  to  the 
United  States ;  or  shall  bring  into  the  United  States,  or  any  place 
subject  to  the  jurisdiction  thereof,  from  any  foreign  place  any 
such  engraving,  photograph,  print,  or  impression,  except  by  di- 
rection of  some  proper  officer  of  the  United  States;  or  whoever 
shall  have  or  retain  in  his  control  or  possession,  after  a  distinctive 
paper  has  been  adopted  by  the  Secretary  of  the  Treasury  for  the 
obligations  and  other  securities  of  the  United  States,  any  similar 
paper  adapted  to  the  making  of  any  such  obligation  or  other  se- 
curity, except  under  the  authority  of  the  Secretary  of  the  Treas- 
ury or  some  other  proper  officer  of  the  United  States,  shall  be 
fined  not  more  than  five  thousand  dollars,  or  imprisoned  not  more 
than  fifteen  years,  or  both.  (Rev.  Stat.  U.  S.  Sec.  5430;  Act 
March  4,  1909,  Sec.  150;  35  Stat.  L.,  1116.) 

Notes  issued  by  a  State  bank  are  not  obligations  issued  under  au- 
thority of  the  United  States  within  the  meaning  of  this  section.  (U. 
S.  v.  Conners,  111  Fed.  Rep.,  734.) 


179 

§  172.  Passing,  Selling,  etc.,  Counterfeits. — Whoever,  with  in- 
tent to  defraud,  shall  pass,  utter,  publish,  or  sell,  or  attempt  to 
pass,  utter,  publish,  or  sell,  or  shall  bring  into  the  United  States, 
or  any  place  subject  to  the  jurisdiction  thereof,  with  intent  to 
pass,  publish,  utter,  or  sell,  or  shall  keep  in  possession  or  conceal 
with  like  intent  any  falsely  made,  forged,  counterfeited,  or  altered 
obligation,  or  other  security  of  the  United  States,  shall  be  fined 
not  more  than  five  thousand  dollars,  and  imprisoned  not  more 
than  fifteen  years.  (Rev.  Stat.  U.  S.  Sec.  5431;  Act  March  4, 
1909,  Sec.  151;  35  Stat.  L.,  1116.) 

§  173.  Taking  Impressions  of  Plates,  etc. — Whoever,  without 
authority  from  the  United  States,  shall  take,  procure,  or  make, 
upon  lead,  foil,  wax,  plaster,  paper,  or  any  other  substance  or 
material,  an  impression,  stamp,  or  imprint  of,  from,  or  by  the 
use  of  any  bed-plate,  bed-piece,  die,  roll,  plate,  seal,  type,  or  other 
tool,  implement,  instrument,  or  thing  used  or  fitted  or  intended  to 
be  used  in  printing,  stamping,  or  impressing,  or  in  making  other 
tools,  implements,  instruments,  or  things,  to  be  used,  or  fitted  or 
intended  to  be  used,  in  jarinting,  stamping,  or  impressing  any  kind 
or  description  of  obligation  or  other  security  of  the  United  States, 
now  authorized  or  hereafter  to  be  authorized  by  the  United  States, 
or  circulating  note  or  evidence  of  debt  of  any  banking  association 
under  the  laws  thereof,  shall  be  fined  not  more  than  five  thousand 
dollars,  or  imprisoned  not  more  than  ten  years,  or  both.  (Rev. 
Stat.  U.  S.  Sec.  5432;  Act  March  4,  1909,  Sec.  152;  35  Stat. 
L.,  1117.) 

§  174.  Persons  Having  Impressions,  etc.,  in  Their  Pos- 
session.— Whoever,  with  intent  to  defraud,  shall  have  in  his  pos- 
session, keeping,  custody,  or  control,  without  authority  from  the 
United  States,  any  imprint,  stamp,  or  impression,  taken  or  made 
upon  any  substance  or  material  whatsoever,  of  any  tool,  imple- 
ment, instrument,  or  thing,  used  or  fitted  or  intended  to  be  used, 
for  any  of  the  purposes  mentioned  in  the  preceding  section;  or 
whoever,  with  intent  to  defraud,  shall  sell,  give,  or  deliver  any 
such  imprint,  stamp,  or  impression  to  any  other  person,  shall  be 


180 

fined  not  more  than  five  thousand  dollars,  or  imprisoned  not  more 
than  ten  years,  or  both.  (Eev.  Stat.  U.  S.  Sec.  5433;  Act  March 
4,  1909,  Sec.  153;  35  Stat.  L.,  1117.) 

§  175.  Buying,  Selling,  etc.,  Counterfeits,  etc. — Whoever  shall 
buy,  sell,  exchange,  transfer,  receive,  or  deliver,  any  false,  forged, 
counterfeited  or  altered  obligation  or  other  security  of  the  United 
States,  or  circulating  note  of  any  banking  association  organized 
or  acting  under  the  laws  thereof,  which  has  been  or  may  hereafter 
be  issued  by  virtue  of  any  act  of  Congress,  with  the  intent  that 
the  same  be  passed,  published,  or  used  as  true  and  genuine,  shall 
be  fined  not  more  than  five  thousand  dollars,  or  imprisoned  not 
more  than  ten  years,  or  both.  (Rev.  Stat.  U.  S.  Sec.  5434;  Act 
March  4,  1909,  Sec.  154;  35  Stat.  L.,  1117.) 

§  176.  Issuing,  etc.,  Notes  of  Closed  Banks. — In  all  cases  where 
the  charter  of  any  corporation  which  has  been  or  may  be  created 
by  act  of  Congress  has  expired  or  may  hereafter  expire,  if  any 
director,  officer,  or  agent  of  the  corporation,  or  any  trustee  thereof, 
or  any  agent  of  such  trustee,  or  any  person  having  in  his  possession 
or  under  his  control  the  property  of  the  corporation  for  the  pur- 
pose of  paying  or  redeeming  its  notes  and  obligations,  shall  know- 
ingly issue,  reissue,  or  utter  as  money,  or  in  any  other  way  know- 
ingly put  in  circulation  any  bill,  note,  check,  draft,  or  other  security 
purporting  to  have  been  made  by  any  such  corporation  whose 
charter  has  expired,  or  by  any  officer  thereof,  or  purporting  to 
have  been  made  under  authority  derived  therefrom,  or  if  any  per- 
son shall  knowingly  aid  in  any  such  act,  he  shall  be  fined  not 
more  than  ten  thousand  dollars,  or  imprisoned  not  more  than  five 
years,  or  both.  But  nothing  herein  shall  be  construed  to  make  it 
unlawful  for  any  person,  not  being  such  director,  officer,  or  agent 
of  the  corporation,  or  any  trustee  thereof,  or  any  agent  of  such 
trustee,  or  any  person  having  in  his  possession  or  under  his  con- 
trol the  property  of  the  corporation  for  the  purpose  hereinbefore 
set  forth,  who  has  received  or  may  hereafter  receive  such  bill,  note, 
check,  draft,  or  other  security,  bona  fide  and  in  the  ordinary  trans- 
actions of  business,  to  utter  as  money  or  otherwise  circulate  the 


181 

same.     (Eev.  Stat.  IT.  S.  Sec.  5137;  Act  March  4,  1909,  Sec.  174; 
35  Stat.  L.,  1122.) 

This  section  was  an  act  originally  passed  in  1837  to  apply  to  the 
Second  Bank  of  the  United  States,  the  charter  of  which  had  just 
expired.  For  some  reason  or  other  the  compilers  embodied  this  old  act 
in  the  Revised  Statutes. 

§  177.  Receipt  of  Public  Money  When  Not  Authorized  De- 
positary.— Every  banker,  broker,  or  other  person  not  an  authorized 
depositary  of  public  moneys,  who  shall  knowingly  receive  from  any 
disbursing  officer,  or  collector  of  internal  revenue,  or  other  agent 
of  the  United  States,  any  public  money  on  deposit,  or  by  way  of 
loan  or  accommodation,  with  or  without  interest,  or  otherwise 
than  in  payment  of  a  debt  against  the  United  States,  or  shall  use, 
transfer,  convert,  appropriate,  or  apply  any  portion  of  public 
money  for  any  purpose  not  prescribed  by  law,  and  every  president, 
cashier,  teller,  director,  or  other  officer  of  any  bank  or  banking  as- 
sociation, who  shall  violate  any  provision  of  this  section,  is  guilty 
of  embezzlement  of  the  public  money  so  deposited,  loaned,  trans- 
ferred, used,  converted,  appropriated,  or  applied,  and  shall  be 
fined  not  more  than  the  amount  embezzled,  or  imprisoned  not  more 
than  ten  years,  or  both.  (Eev.  Stat.  U.  S.  Sec.  5497;  Act  March 
4,  1909,  Sec.  96;  35  Stat.  L.,  1106.) 

It  will  be  seen  from  this  section  that  all  banks  other  than  public 
depositaries  are  put  on  notice  in  regard  to  dealings  with  disbursing 
officers,  etc.,  of  the  United  States.  If  the  provisions  of  this  section  are 
violated,  such  violation  constitutes  embezzlement.  Sections  3639  and 
3651  of  the  Revised  Statutes  are  also  of  importance  to  bankers  in  this 
connection  as  having  reference  to  public  moneys. 

§  178.  Political  Contributions.— That  it  shall  be  unlawful  for 
any  National  bank,  or  any  corporation  organized  by  authority  of 
any  laws  of  Congress,  to  make  a  money  contribution  in  connection 
with  any  election  to  any  political  office.  It  shall  also  be  unlaw- 
ful for  any  corporation  whatever  to  make  a  money  contribution  in 
connection  with  any  election  at  which  Presidential  and  Vice-Presi- 
dential electors  or  a  Representative  in  Congress  is  to  be  voted  for 
or  any  election  by  any  State  legislature  of  a  United  States  Sena- 


182 

tor.  Every  corporation  which  shall  make  any  contribution  in 
violation  of  the  foregoing  provisions  shall  be  subject  to  a  fine  not 
exceeding  five  thousand  dollars,  and  every  officer  or  director  of  any 
corporation  who  shall  consent  to  any  contribution  by  the  corpora- 
tion in  violation  of  the  foregoing  provisions  shall  upon  conviction 
be  punished  by  a  fine  not  exceeding  one  thousand  and  not  less 
than  two  hundred  and  fifty  dollars,  or  by  imprisonment  for  a  term 
of  not  more  than  one  year,  or  both  such  fine  and  imprisonment  in 
the  discretion  of  the  court.     (Act  Jan.  26,  1907;  34  Stat.  L.,  864.) 

§  179.  Eestrictions  on  Checks  Less  Than  One  Dollar. — No  per- 
son shall  make,  issue,  circulate,  or  pay  out  any  note,  check,  memo- 
randum, token  or  other  obligation  for  a  less  sum  than  one  dollar, 
intended  to  circulate  as  money  or  to  be  received  or  used  in  lieu  of 
lawful  money  of  the  United  States;  and  every  person  so  offending 
shall  be  fined  not  more  than  five  hundred  dollars  or  imprisoned 
not  more  than  six  months,  or  both.  (Rev.  Stat.  U.  S.,  Sec.  3583; 
Act  March  4,  1909,  Sec.  178;  35  Stat.  L.,  1122.) 

This  section  does  not  prohibit  the  issue  of  checks  in  any  amount,  no 
matter  how  small,  for  ordinary  purposes.  It  applies  only  to  those 
cases  where  the  checks  are  intended  to  circulate  as  money. 

§  180.  Imitation  of  National  Bank  Notes — Penalty  for. —  It 
shall  not  be  lawful  to  design,  engrave,  print,  or  in  any  manner 
make  or  execute,  or  to  ^^tter,  issue,  distribute,  circulate,  or  use,  any 
business  or  professional  card,  notice,  placard,  circular,  hand-bill,  or 
advertisement,  in  the  likeness  or  similitude  of  any  circulating  note 
or  other  obligation  or  security  of  any  banking  association  organized 
or  acting  under  the  laws  of  the  United  States  which  has  been  or 
may  be  issued  under  any  act  of  Congress,  or  to  write,  print,  of 
otherwise  impress  upon  any  such  note,  obligation,  or  security,  any 
business  or  professional  card,  notice,  or  advertisement,  or  any 
notice  or  advertisement  of  any  matter  or  thing  whatever.  Who- 
ever shall  violate  any  provision  of  this  section  shall  be  fined  not 
more  than  one  hundred  dollars,  or  imprisoned  not  more  than  six 
months,  or  both.  (Rev.  Stat.  U.  S.  Sec.  5188;  Act  March  4, 
1909,  Sec.  175;  35  Stat.  L.,  1122.) 


183 

§  181.  Penalty  for  Mutilating  Notes,  etc.— Whoever  shall  mu- 
tilate, cut,  deface,  disfigure,  or  perforate  with  holes,  or  unite  or 
cement  together,  or  do  any  other  thing  to  any  bank  bill,  draft,  note, 
or  other  evidence  of  debt,  issued  by  any  National  banking  associa- 
tion, or  shall  cause  or  procure  the  same  to  be  done  with  intent  to 
render  such  bank  bill,  draft,  note  or  other  evidence  of  debt  unfit  to 
be  reissued  by  said  association,  shall  be  fined  not  more  than  one 
hundred  dollars,  or  imprisoned  not  more  than  six  months,  or  both. 
(Rev.  Stat.  U.  S.  Sec.  5189;  Act  March  4,  1909,  Sec.  176;  35 
Stat.  L.,  1122.) 

§  182.  Use  of  Title  "national."—  All  banks  not  organized  and 
transacting  business  under  the  National  currency  laws,  or  under 
this  Title,  and  all  persons  or  corporations  doing  the  business  of 
bankers,  brokers,  or  savings  institutions,  except  savings  banks  au- 
thorized by  Congress  to  use  the  word  "National"  as  a  part  of  their 
corporate  name,  are  prohibited  from  using  the  word  "National" 
as  a  portion  of  the  name  or  title  of  such  bank,  corporation,  firm, 
or  partnership;  and  any  violation  of  this  prohibition  committed 
after  the  third  day  of  September,  eighteen  hundred  and  seventy- 
three,  shall  subject  the  party  chargeable  therewith  to  a  penalty  of 
fifty  dollars  for  each  day  during  which  it  is  permitted  or  repeated. 
(Eev.  Stat.  IT.  S.  Sec.  5243.) 

Use  of  Wokd  "Federal." — The  Federal  Reserve  Board  discourages 
the  use  of  the  word  "Federal"  as  part  of  the  title  of  member  banks. 
(Informal  Ruling  of  Board,  July  21,  1917.) 


CHAPTER  X. 

Suits,  Jurisdiction  and  Evidence. 

Section  183.  Jurisdiction  of  Suits  by  and  Against  National  Banks. 

184.  Same  Subject — Federal  Courts. 

185.  Original  Jurisdiction  of  District  Court. 

186.  Attachment,  etc.,  Before  Final  Judgment  Prohibited. 

187.  Proceedings  to  Enjoin  Comptroller — Where  Had. 

188.  United  States  District  Attorney  to  Conduct  Suits. 

189.  Instruments  Certified  by  Comptroller  as  Evidence. 

190.  Certified   Copy  of  Organization   Certificate  as  Evi- 

dence. 

§  183.  Jurisdiction  of  Suits  by  and  Against  National  Banks. — 

That  the  jurisdiction  for  suits  hereafter  brought  by  or  against  any 
association  established  under  any  law  providing  for  National 
banking  associations,  except  suits  between  them  and  the  United 
States,  or  its  officers  and  agents,  shall  be  the  same  as,  and  not  other 
than,  the  jurisdiction  for  suits  by  or  against  banks  not  organized 
under  any  law  of  the  United  States  which  do  or  might  do  banking 
business  where  such  National  banking  associations  may  be  doing 
business  when  such  suits  may  be  begun.  And  all  laws  and  parts 
of  laws  of  the  United  States  inconsistent  with  this  proviso  be,  and 
the  same  are  hereby,  repealed.  (Act  July  12,  1882,  Ch.  290,  Sec. 
4;  22  Stat.  L.,  162.) 

Statute  Applies  to  State  Courts. — The  Act  of  1882  providing  that 
jurisdiction  should  be  the  same  as  in  actions  against  other  than  Na- 
tional banks  was  not  superseded  or  repealed  by  24  Stat.  L.,  554  as 
amended  by  Act  of  August  13,  1888,  25  Stat.  L.,  436.  Nor  does  the 
former  statute  refer  only  to  the  jurisdiction  of  Federal  courts;  it  ap- 
plies to  actions  instituted  in  the  courts  of  the  State  in  which  the  de- 
fendant is  a  resident.  (Levitan  v.  Houghton  Nat.  Bank,  174  Mich., 
556.) 

184 


185 

§  184.  Same  Subject — Federal  Courts.— That  all  National  bank- 
ing associations  established  under  the  laws  of  the  United  States 
shall,  for  the  purposes  of  all  actions  by  or  against  them,  real, 
personal,  or  mixed,  and  all  suits  in  equity,  be  deemed  citizens  of 
the  States  in  which  they  are  respectively  located ;  and  in  such  cases 
the  circuit  and  district  courts  shall  not  have  jurisdiction  other  than 
such  as  they  would  have  in  cases  between  individual  citizens  of  the 
same  State.  The  provisions  of  this  section  shall  not  be  held  to 
affect  the  jurisdiction  of  the  courts  of  the  United  States  in  cases 
commenced  by  the  United  States  or  by  direction  of  an  officer 
thereof,  or  cases  for  winding  up  the  affairs  of  any  such  bank.  ( Act 
Aug.  13,  1888,  Ch.  866,  Sec.  4;  25  Stat.  L.,  436.) 

General  Effect  of  This  Section. — National  banks  are  on  precisely 
the  same  footing  as  individuals  or  other  corporations  with  respect  to 
the  right  to  sue  or  be  sued  in  the  federal  courts.  (Peters  v.  Com- 
mercial Nat.  Bank,  142  U.  S.,  614.)  A  cause  in  which  a  National  bank 
is  a  party  defendant  can  not  be  removed  into  a  Federal  court  on  the 
mere  ground  that  the  defendant  is  a  National  bank.  (Leather  Mfr. 
Nat.  Bank  v.  Cooper,  120  U.  S.,  778;  Wichita  Nat.  Bank  v.  Smith,  72 
Fed.  Rep.,  568.)  And  a  Receiver  of  the  bank  who  is  substituted  as  a 
party  in  place  of  the  bank  has  no  greater  rights  in  this  respect  than 
the  bank  itself.  (Wichita  Nat.  Bank  v.  Smith,  72  Fed.  Rep.,  568.)  The 
assets  of  an  insolvent  National  bank  are  not  brought  under  the  control 
or  protection  of  the  Federal  courts  by  the  transfer  of  such  assets  to 
an  agent  of  the  stockholders.  (Snohomish  County  v.  Puget  Sound  Nat. 
Bank,  81  Fed.  Rep.,  518.)  And  in  the  absence  of  diverse  citizenship 
the  Federal  courts  have  not  jurisdiction  of  a  suit  by  a  stockholder 
against  directors  of  a  National  bank  and  the  bank  to  compel  the 
directors  to  reimburse  the  bank  for  wrongfully  investing  its  funds, 
nor  has  the  District  Court  any  jurisdiction  of  such  a  suit  under  para- 
graph 16  of  Section  24,  Judicial  Code.  (Herrmann  v.  Edwards,  238 
U.  S.,  107.) 

Federal  Questions — Diverse  Citizenship. — But  these  enactments  do 
not  place  National  banks  under  any  disadvantage  with  reference  to 
raising  Federal  questions  in  Federal  courts.  (Walker  v.  Windsor  Na- 
tional Bank,  56  Fed.  Rep.,  76.)  A  suit  which  may  be  brought  in  a 
Federal  court  by  or  against  a  citizen  of  a  State  because  it  arises  under 
the  laws  of  the  United  States,  may,  for  the  same  reason,  be  brought 
by  or  against  a  National  bank  located  in  the  same  State.     (George  v. 


186 

Wallace,  1.35  Fed.  Rep.,  286.  See  also  Witters  v.  Foster,  28  Fed  Rep., 
737;  Hot  Springs  School  Dist.  v.  First  Nat.  Bank,  61  Fed.  Rep.,  417; 
Metropolitan  Nat.  Bank  v.  Claggett,  141  U.  S.,  520;  Logan  Bank  v. 
Townsend,  139  U.  S.,  67.)  The  Federal  courts  have  jurisdiction  of  an 
action  between  a  National  bank  located  in  one  State  and  a  citizen  of 
another  State.  (First  Nat.  Bank  v.  Forest,  40  Fed.  Rep.,  705.  See  also 
Wickham  v.  Hull,  60  Fed.  Rep.,  326:  Rankin  v.  Barton,  199  U.  S.,  228.) 

Actions  by  and  Against  Receivers — These  enactments  do  not  affect 
the  jurisdiction  of  the  Federal  courts  in  cases  brought  for  -winding  up 
affairs  of  insolvent  National  banks;  and  the  Receiver  may  bring  an 
action  in  Federal  courts  to  collect  the  assets  of  the  bank  without  regard 
to  the  citizenship  of  the  parties.  (Bates  v.  Dresser,  229  Fed.  Rep.,  772; 
Murray  v.  Chambers,  151  Fed.  Rep.,  142;  Rankin  v.  Herod,  140  Fed. 
Rep.,  661;  Fisher  v.  Yoder,  53  Fed.  Rep.,  565;  Linn  County  Nat.  Bank 
v.  Crawford,  69  Fed.  Rep.,  532;  Hendee  v.  Connecticut,  etc.,  R.  R.  Co., 
26  Fed.  Rep.,  677;  Burnham  v.  First  Nat.  Bank,  53  Fed.  Rep.,  163.) 
Thus,  a  suit  brought  by  a  Receiver  to  enforce  a  liability  due  to  the 
bank,  and  to  secure  a  sale  under  the  order  of  the  court  of  pledged 
securities,  is  one  for  winding  up  the  affairs  of  the  bank,  and  within 
the  jurisdiction  of  the  Circuit  Court,  without  regard  to  the  citizen- 
ship of  the  parties.  (McCartney  v.  Earle,  115  Fed.  Rep.,  462;  Gilbert  v. 
McNulta,  96  Fed.  Rep.,  83.)  But  the  Circuit  Court  has  no  jurisdiction 
of  a  suit  in  equity  against  a  Receiver  appointed  by  the  Comptroller 
where  the  amount  in  controversy  is  less  than  $2,000  (now  $3,000). 
(Smithsoh  v.  Hubbell,  81  Fed.  Rep.,  593.) 

Agent  of  Stockholders. — The  Federal  courts  have  jurisdiction  of  an 
action  by  or  against  the  agent  of  the  shareholders,  chosen  under  the 
Act  of  June  30,  1876,  regardless  of  the  question  of  citizenship.  (Guar- 
anty Co.  v.  Hanway,  104  Fed.  Rep.,  369;  International  Trust  Co.  v. 
Weeks,  203  U.  S.,  364;  see  also  George  v.  Wallace,  135  Fed.  Rep.,  286.) 

Jurisdiction  of  State  Courts. — For  jurisdictional  purposes,  a  Na- 
tional bank  is  a  citizen  of  the  State  in  which  it  is  located.  (Hazen  v. 
Lyndonville  Nat.  Bank,  70  Vt,  543;  Davis  v.  Cook,  9  Mo.,  134.)  The 
State  courts  have  jurisdiction  of  an  action  brought  by  a  shareholder 
on  behalf  of  himself  and  other  shareholders  to  recover  of  the  directors 
of  an  insolvent  National  bank  damages  for  injuries  resulting  from 
their  negligence  and  misconduct.  (Brinckerhoff  v.  Bostwick,  88  N.  Y., 
52.)  And  State  courts  have  jurisdiction  of  actions  against  National 
banks  to  recover  the  penalty  prescribed  by  Congress  for  taking  usu- 
rious interest.  (Schuyler  v.  Bullong,  28  Neb.,  684;  Henderson  Nat. 
Bank  v.  Alves,  91  Ky.,  142;  Ordway  v.  Central  Nat.  Bank,  47  Md.,  217; 


187 

Bletz  v.  Columbia  Nat.  Bank,  87  Pa.  St.,  87;  Kade  v.  McVey,  31  Ohio 
St.,  231.)  They  also  have  power  to  issue  a  writ  of  mandamus  requiring 
the  directors  of  a  National  bank  in  liquidation  to  exhibit  the  books 
to  the  stockholders.  (Matter  of  Tuttle  v.  Iron  Nat.  Bank,  170  N.  Y., 
9.)  And  where  the  period  of  corporate  existence  of  a  National  bank 
has  expired,  and  its  affairs  are  being  wound  up,  a  Receiver  for  its 
property  may  be  appointed  by  a  State  court  upon  the  application  of 
a  stockholder.  (Cogswell  v.  Second  Nat.  Bank,  56  Atl.  Rep.,  574.)  But 
State  courts  have  no  jurisdiction  in  criminal  cases  arising  under  the 
National  Bank  Act.  (In  re  Eno,  54  Fed.  Rep.,  669;  Commonwealth  v. 
Felton,  101  Mass.,  204;  Commonwealth  v.  Ketner,  92  Pa.  St.,  372.) 

The  State  statute  of  limitations  applies  to  a  suit  brought  by  the 
receiver  of  a  National  bank  against  a  shareholder  to  recover  an  assess- 
ment upon  his  stock  to  pay  the  debts  of  the  bank.  (Butler  v.  Poole, 
44  Fed.  Rep.,  586.) 

§  185.  Original  Jurisdiction  of  District  Court  —  The  district 
court  shall  have  original  jurisdiction  as  follows:  *  *  *  * 

Sixteenth.  Of  all  cases  commenced  by  the  United  States,  or 
by  direction  of  any  officer  thereof,  against  any  National  banking 
association,  and  cases  for  winding  up  the  affairs  of  any  such  bank ; 
and  of  all  suits  brought  by  any  banking  association  established  in 
the  district  for  which  the  court  is  held,  under  the  provisions  of 
title  "National  Bank,"  Revised  Statutes,  to  enjoin  the  Comptroller 
of  the  Currency,  or  any  receiver  acting  under  his  direction,  as  pro- 
vided by  said  title.  And  all  National  banking  associations  estab- 
lished under  the  laws  of  the  United  States  shall,  for  the  purposes 
of  all  other  actions  by  or  against  them,  real,  personal,  or  mixed, 
and  all  suits  in  equity,  be  deemed  citizens  of  the  States  in  which 
they  are  respectively  located.  (Act  March  3,  1911,  Sec.  24;  36 
Stat.  L.,  1092.) 

Proceedings  to  enjoin  Comptroller  are  those  authorized  by  section 
5237,  United  States  Revised  Statutes.  Until  the  passage  of  the  Act 
of  March  3,  1911,  the  circuit  courts  had  this  jurisdiction  under  section 
629,  United  States  Revised  Statutes. 

§  186.  Attachment,  etc.,  Before  Final  Judgment  Prohibited. — 
No  attachment,  injunction,  or  execution  shall  be  issued  against  such 
association  or  its  property  before  final  judgment  in  any  suit,  action 


188 

or  proceeding,  in  any  State,  county,  or  municipal  court.      (Rev. 
Stat.  U.  S.  Sec.  5242.) 

This  section  is  constitutional.     (Dennis  v.  First  Nat.  Bank  of  Seattle, 
127  Cal.,  453.) 


Attachments—  In  Pacific  Nat.  Bank  v.  Mixter  (124  TJ.  S.,  721  it  was 
held  that  the  effect  of  this  provision  is  to  write  into  all  State  attach- 
ment laws  an  exception  in  favor  of  National  banks,  and  all  such  laws 
must  be  read  as  if  they  contained  an  exception  in  favor  of  National 
banks.  As  the  attachment  is  void,  a  bond  given  by  a  National  bank 
to  dissolve  such  attachments,  served  by  summons  of  garnishment,  is 
also  void.  (Planters'  Bank  v.  Berry,  92  Ga.,  264.)  Where  service  is 
made  on  a  National  bank  only  by  attachment  and  publication  or  ser- 
vice out  of  the  State,  the  attachment  being  prohibited  by  this  section 
will  be  vacated  and  the  service  set  aside.  (Van  Reed  v.  People's  Nat. 
Bank,  198  U.  S.,  554;  Garner  v.  Second  Nat.  Bank,  66  Fed.  Rep.,  369.) 
The  provision  of  this  section  prohibiting  attachments  is  not  repealed 
by  the  Act  of  Congress  of  July  12,  1882,  providing  that  the  jurisdiction 
for  suits  thereafter  brought  against  National  banks  shall  be  the  same 
as  for  suits  against  State  banks,  and  repealing  laws  inconsistent  there- 
with. (Raynor  v.  Pacific  Nat.  Bank,  93  N.  Y.,  371.)  The  prohibition 
applies  whether  the  bank  is  solvent  or  insolvent.  (Van  Reed  v. 
People's  Nat.  Bank,  173  N.  Y.,  314.)  But  it  does  not  apply  where 
the  bank  intervenes  in  an  attachment  suit  and  claims  the  property. 
(Willard  Mfg.  Co.  v.  Tierney,  130  N.  C,  611.)  And  an  attachment 
sued  out  against  a  National  bank  as  garnishee  is  not  an  attachment 
against  the  bank  or  its  property,  within  the  meaning  of  this  section. 
(Earle  v.  Pennsylvania,  178  U.  S.,  449;  Earle  v.  Conway,  178  U.  S., 
456.)  The  motion  to  dissolve  the  attachments  may  be  made  at  any 
time  before  the  attached  property  has  been  applied  to  payment  of 
the  judgment.  (McBride  v.  Illinois  Nat.  Bank,  128  App.  Div.  (N.  Y.), 
503.) 

Injunctions. — This  section  forbids  State  courts  to  grant  injunctions 
against  National  banks  before  final  judgment;  and  the  prohibition  is 
not  repealed  by  Stat.  L.  1882,  C.  290,  Sec.  4,  or  Stat.  L.  1887,  C, 
373,  Sec.  4,  or  Stat.  L.  1888,  C.  866,  Sec.  4.  (Freeman  Manufactur- 
ing Company  v.  National  Bank  of  the  Republic,  160  Mass.,  398.)  But 
this  section  does  not  deprive  the  Federal  courts  of  the  power  to  issue 
such  an  injunction.  (Hoover  v.  Weiss  Malting  and  Elevator  Co.,  55 
Fed.  Rep.,  356.    But  see  Baker  v.  Ault,  78  Fed.  Rep.,  374.) 


189 

§  187.  Proceedings  to  Enjoin   Comptroller— Where  Had.— All 

proceedings  by  any  National  banking  association  to  enjoin  the 
Comptroller  of  the  Currency,  under  the  provisions  of  any  law  re- 
lating to  National  banking  associations,  shall  be  had  in  the  district 
where  such  association  is  located.    (Rev.  Stat.  U.  S.  Sec.  736.) 

§  188.  United  States  District  Attorney  to  Conduct  Suits.— All 
suits  and  proceedings  arising  out  of  the  provisions  of  law  govern- 
ing National  banking  associations,  in  which  the  United  States  or 
any  of  its  officers  or  agents  shall  be  parties,  shall  be  conducted  by 
the  district  attorneys  of  the  several  districts  under  the  direction 
and  supervision  of  the  Solicitor  of  the  Treasury.  (Eev.  Stat.  U.  S. 
Sec.  380.) 

Compensation  of  District  Attorney. — If  a  District  Attorney  of  the 
United  States,  acting  under  the  provisions  of  this  section,  conducts 
a  suit  or  proceeding  arising  out  of  the  provisions  of  law  governing  Na- 
tional banking  associations,  he  is  entitled  to  no  remuneration  other 
than  that  coming  from  his  salary,  from  the  compensation  and  fees 
authorized  to'  be  taxed  and  allowed,  and  such  additional  compensation 
as  is  expressly  allowed  by  law,  specifically,  on  account  of  services 
named.     (Gibson  v.  Peters,  150  U.  S.,  342.) 

Receiver  as  Officer  or  Agent. — The  receiver  of  a  National  bank  is 
an  officer  or  agent  of  the  United  States  within  the  meaning  of  those 
terms  as  used  in  this  section.  (Id.)  (See  also  United  States  v.  Twin- 
ing, 132  Fed.  Rep.,  129.) 

§  189.  Instruments    Certified   by    Comptroller   as   Evidence. — 

Every  certificate,  assignment,  and  conveyance  executed  by  the 
Comptroller  of  the  Currency,  in  pursuance  of  law,  and  sealed  with 
his  seal  of  office,  shall  be  received  in  evidence  in  all  places  and 
courts;  and  all  copies  of  papers  in  his  office,  certified  by  him  and 
authenticated  by  the  said  seal,  shall  in  all  cases  be  evidence  equally 
with  the  originals.  An  impression  of  such  seal  directly  on  the 
paper  shall  be  as  valid  as  if  made  on  wax  or  wafer.  (Rev.  Stat. 
U.  S.  Sec.  884.) 

Certified  Copies  as  Evidence  in  State  Court. — .Under  U.  S.  Rev.  Sts. 
sections   178,   327,   884,   copies   of  papers   oh   file   in   the   office  of   the 


190 

Comptroller  of  the  Currency,  certified  by  his  deputy  and  authenticated 
by  his  seal  of  office,  are  competent  evidence,  in  an  action  by  a  receiver 
of  a  National  bank  to  recover  the  amount  of  an  assessment  upon  a 
shareholder,  to  prove  the  charter  of  the  bank,  its  extension,  the  adjudi- 
cation of  insolvency  by  the  Comptroller,  the  appointment  of  the  plain- 
tiff as  receiver,  the  assessment  and  the  authorizing  and  directing  of 
the  receiver  to  bring  suit  for  its  collection.  (Weitzel  v.  Brown,  224 
Mass.,  190.) 

Judicial  Notice.— The  court  will  take  judicial  notice  that  a  person, 
-who'  signed  as  "Acting  Comptroller  of  the  Currency"  a  certificate  bear- 
ing the  seal  of  the  Comptroller  of  the  Currency  of  the  United  States 
and  asserting  the  truth  of  copies  of  originals  on  file  in  that  office, 
held  that  office  and  will  assume  that  at  the  date  of  his  certificate  he 
was  authorized  to  exercise  the  powers  and  discharge  the  duties  of  the 
Comptroller,  and  was  therefore,  at  the  time  acting  Comptroller. 
(Weitzel  v.  Brown,  224  Mass.,  190;  Keyser  v.  Hitz,  133  U.  S.,  438; 
Aspinwall  v.  Butler,  133  U.  S.,  595.) 

How  Copies  Obtained. — Certified  copies  of  papers  are  furnished  by 
the  Comptroller's  office  when  such  copies  could  be  obtained  upon  an 
order  of  court.  An  order  of  court  is  not  usually  required,  but  the 
parties  should  set  forth  in  detail  the  purpose  for  which  the  copies 
are  desired. 

§  190.  Certified  Copy  of  Organization  Certificate  as  Evidence. — 

— Copies  of  the  organization  certificate  of  any  National  banking 
association,  duly  certified  by  the  Comptroller  of  the  Currency,  and 
authenticated  by  his  seal  of  office,  shall  be  evidence  in  all  courts 
and  places  within  the  jurisdiction  of  the  United  States  of  the  exist- 
ence of  the  association,  and  of  every  matter  which  could  be  proved 
by  the  production  of  the  original  certificate.  (Rev.  Stat.  TJ.  S. 
Sec.  885.) 

Effect  of  Certificate  as  Evidence. — This  certificate,  together  with 
proof  that  the  bank  has  been  acting  as  a  National  bank  for  a  long 
time,  is  amply  sufficient  evidence  to  establish,  at  least  prima  facie,  the 
existence  of  the  corporation.  (Mix  v.  National  Bank  of  Bloomington, 
91  111.,  20.  See  also  Thatcher  v.  West  River  Nat.  Bank,  19  Mich.,  196; 
Merchants'  Nat.  Bank  v.  Glendon,  120  Mass.,  97.)  And  such  certificate 
is  competent  evidence  in  a  State  court.  (Tapley  v.  Martin,  116  Mass., 
275.)     In  a  suit  against  the  bank  or  its  stockholders  this  certificate 


191 

is  conclusive  evidence  of  the  organization.     (Casey  v.  Galli,  94  U.  S., 
673.) 

Pkoof  by  Othek  Evidence. — In  an  action  by  a  National  bank  it  is 
competent  to  prove  by  parol  that  it  was  carrying  on  a  general  banking 
business  as  a  National  bank  authorized  by  the  general  laws  of  the 
United  States  under  the  name  by  which  it  had  sued.  (Yakima  Nat. 
Bank  v.  Knipe,  6  Wash.,  348.) 


192 


PART  TWO 

THE  FEDERAL  RESERVE  ACT,  WITH  ALL  AMENDMENTS 
TO  APRIL  1,  1920. 

Section  191.  Passage  of  Act. 

192.  Title  of  Act  and  Definition  of  Terms. 

193.  Powers  Eeserve  Bank  Organization  Committee — Fed- 

eral Eeserve  Cities  and  Districts. 

194.  Incidental  Powers  of  Organization  Committee. 

195.  Capital   Stock   of   Eeserve   Banks — Subscription   by 

National  Banks. 

196.  Liability  of  Shareholders  of  Eeserve  Banks. 

197.  Penalties  for  Failure  of  National  Banks  to  Signify 

Acceptance  of  Terms  of  Act,  etc. 

198.  Capital  Stock  of  Eeserve  Banks — Public   Subscrip- 

tion. 

199.  Same  Subject — Allotment  to  United  States. 

200.  Same  Subject — Transfers. 

201.  Minimum  Capital  Stock  of  Eeserve  Bank — Status  of 

Eeserve  and  Central  Eeserve  Cities — Expenses  of 
Organization  Committee. 

202.  Branch  Offices  of  Eeserve  Banks. 

203.  Organization  of  Eeserve  Banks. 

204.  Corporate  Powers  of  Eeserve  Banks. 

205.  Duties  of  Directors  of  Eeserve  Banks. 

206.  Classification  of  Directors  of  Eeserve  Banks. 

207.  Qualifications  of  Directors  of  Eeserve  Banks. 

208.  Election  of  "Class  A"  and  "Class  B"  Directors. 

209.  Appointment  of  "Class  C"  Directors — Designation  of 

Federal  Eeserve  Agents  and  Deputy  Federal  Ee- 
serve Agents,  and  Assistants. 

210.  Compensation  of  Directors  of  Eeserve  Banks. 

193 
13 


194 

Section  211.  Powers  of   Organization  Committee — Reserve  Bank 
Directors. 

212.  Terms  of  Directors  of  Reserve  Banks — Filling  of  Va- 

cancies. 

213.  Stock  Issues — Increase,  Decrease  and  Cancellation  of 

Capital  of  Reserve  Banks. 

214.  Dividends  and  Surplus  of  Reserve  Banks. 

215.  Exemption  from  Taxation — Reserve  Banks. 

216.  Conversion  of  State  into  National  Banks. 

217.  State  Banks  as  Members — Admission,  Restrictions, 

Suspension  and  Withdrawal. 

218.  Creation    of    Federal    Reserve    Board — Salaries    of 

Members. 

219.  Organization  of  Board. 

220.  Assessment  to  Meet  Expenses  of  Board. 

221.  Qualifications   of   Members    of    Board — Filling   Va- 

cancies. 

222.  Supervision  of  Secretary  of  Treasury  Over  Board. 

223.  Annual  Report  of  Board  to  Congress. 

224.  Bureau  for  Issue  and  Regulation  of  National  Bank 

Notes  and  Federal  Reserve  Notes. 

225.  Visitorial  Powers  of  Board — Publication  of  Weekly 

Statements. 

226.  Power  of  Board — Rediscount  by   Reserve  Bank  of 

Discounted  Paper  of  Other  Reserve  Banks. 

227.  Power  of  Board  to  Suspend  Reserve  Requirements — 

Tax  on  Deficiency. 

228.  Power  of  Board — Issue,  Delivery  and  Retirement  of 

Federal  Reserve  Notes. 

229.  Power  of  Board — Reserve  and  Central  Reserve  Cities. 

230.  Power  of  Board — Suspension  or  Removal  of  Officer 

or  Director  of  Reserve  Bank. 

231.  Power  of  Board-— Waiting  Off  of  Doubtful  or  Worth- 

less Assets  by  Reserve  Banks. 

232.  Power  of  Board — Suspension,  Liquidation  or  Reor- 

ganization of  Reserve  Bank. 


195 

Section  233.  Power  of  Board — Bonding  of  Federal  Reserve  Agents 
— Performance  of  Duties,  Functions  and  Services 
of  Act. 

234.  Power  of  Board — General  Supervision  Over  Eeserve 

Banks. 

235.  Power  of  Board — Grant  of  Trustee  Powers  to  Na- 

tional Banks. 

236.  Power  of  Board — Employment  of  Assistants,  Clerks, 

etc. 

237.  Power  of  Board — Permission  to  Discount  Paper  in 

Excess  of  Limitation  When  Secured  by  War  Time 
Securities. 

238.  Federal  Advisory  Council. 

239.  Powers  of  Eeserve  Banks — As  Depositary  and  Col- 

lecting Agent — Collection  Charges. 

240.  Powers  of  Eeserve  Banks — Discount  of  Notes,  Drafts, 

and  Bills  of  Exchange. 

241.  Limitation  on  Aggregate  of  Paper  of  One  Borrower 

Eediscounted  for  Any  One  Bank. 

242.  Powers  of  Eeserve  Banks — Discount  of  Acceptances. 

243.  Foreign  and  Domestic  Acceptances  by  Member  Banks. 

244.  Powers    of    Eeserve    Banks — Advances    to    Member 

Banks. 

245.  Limitation  on  Total  Indebtedness  of  National  Bank 

— Exceptions. 

246.  Power  of  Board — Dealings  of  Eeserve  Banks  in  Ne- 

gotiable Paper. 

247.  Power  of  National  Banks  as  Insurance  Agents. 

248.  Acceptance  by  Member  Banks  of  Drafts  and  Bills 

of  Exchange  Drawn  to  Furnish  Dollar  Exchange. 

249.  Powers  of  Eeserve  Banks — Open  Market  Purchases 

of   Bills    of    Exchange,    Trade    Acceptances    and 
Bankers  Acceptances. 

250.  Powers  of  Eeserve  Banks — Gold  Coin  and  Bullion  in 

Open  Market. 

251.  Powers  of  Eeserve  Banks — Notes,  Bonds  and  War- 

rants in  Open  Market. 


196 

Section  252.  Powers  of  Reserve  Banks — Bills  of  Exchange  in  Open 
Market. 

253.  Powers  of  Reserve  Banks — Pates  of  Discount. 

254.  Powers  of  Reserve  Banks — Foreign  Accounts,  Agen- 

cies, and  Correspondents. 

255.  Government  Deposits  in  Reserve  Banks. 

256.  Federal  Reserve  Notes. 

257.  Collateral  Security  for  Federal  Reserve  Notes. 

258.  Federal  Reserve  Notes — Reserve  Against,  Issue,  Ex- 

change, and  Redemption. 

259.  Federal    Reserve    Notes — Redemption    Fund — Para- 

mount Lien  on  Assets  of  Reserve  Bank. 

260.  Reduction  of  Outstanding  Federal  Reserve  Notes. 

261.  Exchange  of  Federal  Reserve  Notes  for  Gold,  Gold 

Certificates  or  Lawful  Money. 

262.  Federal   Reserve   Notes — Substitution   of   Collateral 

to — Retirement  of — Liability  of  Federal  Reserve 
Agent  for. 

263.  Printing  of  Federal  Reserve  Notes. 

264.  Reserve   Banks    as    Collecting    Agents    for   Member 

Banks. 
2/65.  Transfer  of  Funds  Among  Reserve  Banks — Board  as 
Clearing  House  for  Reserve  Banks — Reserve  Banks 
As  Clearing  Houses  for  Member  Banks. 

266.  Deposits  of  Gold  Coin  and  Gold  Certificates  with 

Treasurer  by  Federal  Reserve  Banks  and  Agents. 

267.  Deposit  of  Bonds  by  National  Banks  with  Treasurer 

— Repeal  of  Minimum  Deposit  Requirements. 

268.  Retirement  of  National  Bank  Notes — Sale  of  Bonds 

to  Reserve  Banks. 

269.  Federal  Reserve  Bank  Notes — Similarity  to  National 

Bank  Notes. 

270.  Exchange  by  Reserve  Banks  of  Two  Per  Cent.  Bonds 

for  Three  Per  Cent.  Bonds  and  One-Year  Notes. 

271.  Issue  of  One-Year  Three  Per  Cent.  Gold  Notes  and, 

Thirty-Year  Three  Per  Cent.  Gold  Bonds. 

272.  Exchange  of  One- Year  Notes  for  Thirty-Year  Bonds. 


197 

Section  273.  Definition  of  Demand  and  Time  Deposits. 

274.  Keserves  Carried  by  Member  Banks  Not  in  Reserve 

or  Central  Reserve  Cities. 

275.  Reserves  Carried  by  Member  Banks  Located  in  Re- 

serve Cities. 

276.  Reserves  Carried  by  Member  Banks  Located  in  Cen- 

tral Reserve  Cities. 

277.  Eligible  Paper  as  Reserve. 

278.  Limit    of    Deposit    of    Member    with    Non-Member 

Bank — Member  as  Agent  of  Non-Member  Bank  in 
Discounting  with  Reserve  Banks. 

279.  Withdrawal  of  Required  Reserves — Penalties. 

280.  Calculation  of  Reserves. 

281.  Membership  of  National  Banks  Located  in  United 

States,  but  Outside  of  Continental  United  States. 

282.  Five  Per  Cent.  Redemption  Fund  as  Reserve. 

283.  Appointment  of  Examiners — Examinations  of  Mem- 

ber Banks. 

284.  Salaries  of  Examiners — Expense  of  Examinations. 

285.  Special  Examination  of  Members  by  Reserve  Banks. 

286.  Limitation  of  Visitorial  Powers. 

287.  Examination  of  Reserve  Banks  by  Board. 

288.  Fees,  Commissions,  Gifts,  etc.,  Prohibited  to  Officers, 

Employees,  etc.,  of  Member  Banks,  and  to  Bank 
Examiners — Exceptions. 

289.  Liability  of  Stockholders  of  National  Banks. 

290.  Loans  on  Real  Estate  by  National  Banks. 

291.  Foreign  Branches  of  National  Banks. 

292.  Power  of  National  Bank  to  Take  Stock  in  Corpora- 

tions Transacting  Foreign  Business. 

293.  Reports  and  Examinations  of  Foreign  Branches,  etc. 

294.  Powers  of  Board  Over  Corporations  in  Which  Na- 

tional Banks  Own  Stook. 

295.  Accounts  of  Foreign  Branches. 

296.  Exception  to  Prohibition  of  Clayton  Act. 

297.  Banking    Corporations    Authorized    to    do    Foreign 

Banking  Business  (the  Edge  Bill). 


198 

Section  298.  Maintenance  of  Standard  of  Value— Parity  of  Forms 
of  Money — Gold  Reserve. 

299.  Emergency  Currency. 

300.  Reduction  of  Capital  Stock  of  National  Banks. 

301.  Saving  Clause. 

302.  Reservation  of  Right  to  Amend,  Alter,  or  Repeal. 

303.  Opinions  of  Counsel  of  Board  on  Negotiable  Instru- 

ments Law,  etc. 

§  191.  Passage  of  Act. — An  Act  entitled  "An  Act  to  provide 
for  the  establishment  of  Federal  reserve  banks,  to  furnish  an 
elastic  currency,  to  afford  means  of  rediscounting  commercial 
paper,  to  establish  a  more  effective  supervision  of  banking  in  the 
United  States,  and  for  other  purposes,"  was  approved  December1 
23,  1913.     (38  Stat.  L.,  251.) 

§  192.  Title  of  Act  and  Definition  of  Terms. — Be  it  enacted  by 
the  Senate  and  House  of  Representatives  of  the  United  States 
of  America  in  Congress  assembled,  That  the  short  title  of  this 
Act  shall  be  the  "Federal  Reserve  Act." 

Wherever  the  word  "bank"  is  used  in  this  Act,  the  word  shall 
be  held  to  include  State  bank,  banking  association,  and  trust 
company,  except  where  National  banks  or  Federal  reserve  banks 
are  specifically  referred  to. 

The  terms  "National  bank"  and  "National  banking  association" 
used  in  this  Act  shall  be  held  to  be  sjmonymous  and  interchange- 
able. The  term  "member  bank"  shall  be  held  to  mean  any  National 
bank,  State  bank,  or  bank  or  trust  company  which  has  become  a 
member  of  one  of  the  reserve  banks  created  by  this  Act.  The 
term  "board"  shall  be  held  to  mean  Federal  Reserve  Board;  the 
term  "district"  shall  be  held  to  mean  Federal  Reserve  district ;  the 
term  "reserve  bank"  shall  be  held  to  mean  Federal  reserve  bank. 
(Sec.  1,  Act  Dec.  23,  1913;  38  Stat.  L.,  251.) 

§  193.  Powers  Reserve  Bank  Organization  Committee — Federal 
Reserve  Cities  and  Districts. — As  soon  as  practicable,  the  Secre- 
tary of  the  Treasury,  the  Secretary  of  Agriculture  and  the  Comp- 
troller of  the  Currency,  aGting  as  "The  Reserve  Bank  Organize 


199 

tion  Committee,"  shall  designate  not  less  than  eight  nor  more  than 
twelve  cities  to  be  known  as  Federal  reserve  cities,  and  shall  divide 
the  continental  United  States,  excluding  Alaska,  into  districts, 
each  district  to  contain  only  one  of  such  Federal  reserve  cities. 
The  determination  of  said  organization  committee  shall  not  be 
subject  to  review  except  by  the  Federal  Eeserve  Board  when  or- 
ganized: Provided,  That  the  districts  shall  be  apportioned  with 
due  regard  to  the  convenience  and  customary  course  of  business 
and  shall  not  necessarily  be  coterminous  with  any  State  or  States. 
The  districts  thus  created  may  be  readjusted  and  new  districts  may 
from  time  to  time  be  created  by  the  Federal  Eeserve  Board,  not 
to  exceed  twelve  in  all.  Such  districts  shall  be  known  as  Federal 
reserve  districts  and  may  be  designated  by  number.  A  majority  of 
the  organization  committee  shall  constitute  a  quorum  with  author- 
ity to  act.     (Sec.  2,  Act  Dec.  23,  1913.) 

On  April  2,  1914,  the  Reserve  Bank  Organization  Committee  rendered 
a  decision  designating  twelve  Federal  reserve  cities  and  determining 
the  twelve  Federal  reserve  districts.  (See  map  on  page  192.)  The 
Federal  reserve  cities  were  designated  as  follows:  No.  1,  Boston; 
No.  2,  New  York;  No.  3,  Philadelphia;  No.  4,  Cleveland;  No.  5,  Rich- 
mond; No.  6,  Atlanta;  No.  7,  Chicago;  No.  8,  St.  Louis;  No.  9,  Min- 
neapolis; No.  10,  Kansas  City;  No.  11,  Dallas;   No.  12,  San  Francisco. 

Abolition  of  Reserve  Districts  and  Reserve  Banks. — The  Federal 
Reserve  Board  has  no  power  to  abolish  existing  Federal  Reserve  Dis- 
tricts or  Federal  Reserve  Banks.  (Opinion  of  Attorney  General,  Nov. 
22,  1915.) 

Change  of  Location  of  Reserve  Bank — Minimum  Capitalization. — 
The  Federal  Reserve  Board  does  not  possess  power  to  change  the  pre- 
sent location  of  any  Federal  Reserve  Bank  and  the  minimum  capitaliza- 
tion of  $4,000,000  required  as  a  condition  precedent  to  commencing 
business  is  not  a  continuing  requirement.  (Opinion  of  Attorney 
General,  April  14,  1916.) 

Reduction  of  Federal  Reserve  Districtis. — The  Federal  Reserve  Act 
does  not  give  to  the  Federal  Board  the  power  to  reduce  the  number 
of  Federal  Reserve  districts  determined  by  the  Reserve  Bank  organiza- 
tion committee.     (Opinion  of  Counsel  of  Board,  Nov.  22,  1915.) 


200 

§  194.  Incidental  Powers  of  Organization  Committee. —  Said 
organization  committee  shall  be  authorized  to  employ  counsel  and 
expert  aid,  to  take  testimony,  to  send  for  persons  and  papers,  to 
administer  oaths,  and  to  make  such  investigation  as  may  be 
deemed  necessary  by  the  said  committee  in  determining  the  re- 
serve districts  and  in  designating  the  cities  within  such  districts 
where  such  Federal  reserve  banks  shall  be  severally  located.  The 
said  committee  shall  supervise  the  organization  in  each  of  the  cities 
designated  of  a  Federal  reserve  bank,  which  shall  include  in  its 
title  the  name  of  the  city  in  which  it  is  situated,  as  "Federal  Re- 
serve Bank  of  Chicago."    (Sec.  2,  Act  Dec.  23,  1913.) 


§  195.  Capital  Stock  of  Reserve  Banks — Subscription  by  Na- 
tional Banks. — Under  regulations  to  be  prescribed  by  the  organi- 
zation committee,  every  National  banking  association  in  the  United 
States  is  hereby  required,  and  every  eligible  bank  in  the  United 
States  and  every  trust  company  within  the  District  of  Columbia, 
is  hereby  authorized  to  signify  in  writing,  within  sixty  days  after 
the  passage  of  this  Act,  its  acceptance  of  the  terms  and  provisions 
hereof.  When  the  organization  committee  shall  have  designated 
the  cities  in  which  Federal  reserve  banks  are  to  be  organized,  and 
fixed  the  geographical  limits  of  the  Federal  reserve  districts,  every 
National  banking  association  within  that  district  shall  be  required 
within  thirty  days  after  notice  from  the  organization  committee,  to 
subscribe  to  the  capital  stock  of  such  Federal  reserve  bank  in  a 
sum  equal  to  six  per  centum  of  the  paid-up  capital  stock  and  sur- 
plus of  such  bank,  one-sixth  of  the  subscription  to  be  payable  on 
call  of  the  organization  committee  or  of  the  Federal  Reserve  Board, 
one-sixth  within  three  months  and  one-sixth  within  six  months 
thereafter,  and  the  remainder  of  the  subscription,  or  any  part 
thereof,  shall  be  subject  to  call  when  deemed  necessary  by  the 
Federal  Reserve  Board,  said  payments  to  be  in  gold  or  gold  certifi- 
cates.   (Sec.  2,  Act  Dec.  23,  1913.) 


§  196.  Liability  of  Shareholders  of  Reserve  Banks.— The  share- 


201 

holders  of  every  Federal  reserve  bank  shall  be  held  individually 
responsible,  equally  and  ratably,  and  not  one  for  another,  for  all 
contracts,  debts,  and  engagements  of  such  bank  to  the  extent  of 
the  amount  of  their  subscriptions  to  such  stock  at  the  par  value 
thereof  in  addition  to  the  amount  subscribed,  whether  such  sub- 
scriptions have  been  paid  up  in  whole  or  in  part,  under  the  pro- 
visions of  this  Act.     (Sec.  2,  Act  Dec.  23,  1913.) 


§  197.  Penalties  for  Failure  of  National  Bank  to  Signify  Ac- 
ceptance of  Terms  of  Act,  etc. — Any  National  bank  failing  to  sig- 
nify its  acceptance  of  the  terms  of  this  Act  within  the  sixty  days 
aforesaid,  shall  cease  to  act  as  a  reserve  agent,  upon  thirty  days' 
notice,  to  be  given  within  the  discretion  of  the  said  organization 
committee  or  of  the  Federal  Reserve  Board. 

Should  any  National  banking  association  in  the  United  States 
now  organized  fail  within  one  year  after  the  passage  of  this  Act 
to  become  a  member  bank  or  fail  to  comply  with  any  of  the  pro- 
visions of  this  Act  applicable  thereto,  all  of  the  rights,  privileges, 
and  franchises  of  such  association  granted  to  it  under  the  National 
bank  Act,  or  under  the  provisions  of  this  Act,  shall  be  thereby  for- 
feited. Any  non-compliance  with  or  violation  of  this  Act  shall, 
however,  be  determined  and  adjudged  by  any  court  of  the  United 
States  of  competent  jurisdiction  in  a  suit  brought  for  that  purpose 
in  the  district  or  territory  in  which  such  bank  is  located,  under  di- 
rection of  the  Federal  Reserve  Board,  by  the  Comptroller  of  the 
Currency  in  his  own  name  before  the  association  shall  be  declared 
dissolved.  In  cases  of  such  non-compliance  or  violation,  other  than 
the  failure  to  become  a  member  bank  under  the  provisions  of  this 
Act,  every  director  who  participated  in  or  assented  to  the  same 
shall  be  held  liable  in  his  personal  or  individual  capacity  for  all 
damages  which  said  bank,  its  shareholders,  or  any  other  person 
shall  have  sustained  in  consequence  of  such  violation. 

Such  dissolution  shall  not  take  away  or  impair  any  remedy 
against  such  corporation,  its  stockholders  or  officers,  for  any  lia- 
bility or  penalty  which  shall  have  been  previously  incurred.  (Sec. 
2,  Act  Dec.  23,  1913.) 


202 

§  198.  Capital  Stock  of  Reserve  Banks — Public  Subscription. — 

Should  the  subscriptions  by  banks  to  the  stock  of  said  Federal 
reserve  banks  or  any  one  or  more  of  them  be,  in  the  judgment  of 
the  organization  committee,  insufficient  to  provide  the  amount  of 
capital  required  therefor,  then  and  in  that  event  the  said  organiza- 
tion committee  may,  under  conditions  and  regulations  to  be  pre- 
scribed by  it,  offer  to  public  subscription  at  par  such  an  amount  of 
stock  in  said  Federal  reserve  banks  or  any  one  or  more  of  them, 
as  said  committee  shall  determine,  subject  to  the  same  conditions 
as  to  payment  and  stock  liability  as  provided  for  member  banks. 

ISTo  individual,  copartnership,  or  corporation  other  than  a  mem- 
ber bank  of  its  district  shall  be  permitted  to  subscribe  for  or  to 
hold  at  any  time  more  than  $25,000  par  value  of  stock  in  any 
Federal  reserve  bank.  Such  stock  shall  be  known  as  public  stock 
and  may  be  transferred  on  the  books  of  the  Federal  reserve  bank 
by  the  chairman  of  the  board  of  directors  of  such  bank.  (Sec.  2, 
Act  Dec.  23,  1913.) 


§  199.  Same  Subject — Allotment  to  United  States. — Should  the 
total  subscriptions  by  banks  and  the  public  to  the  stock  of  said 
Federal  reserve  banks,  or  any  one  or  more  of  them,  be,  in  the 
judgment  of  the  organization  committee,  insufficient  to  provide  the 
amount  of  capital  required  therefor,  then  and  in  that  event  the 
said  organization  committee  shall  allot  to  the  United  States  such 
an  amount  of  said  stock  as  said  committee  shall  determine.  Said 
United  States  stock  shall  be  paid  for  at  par  out  of  any  money 
in  the  Treasury  not  otherwise  appropriated,  and  shall  be  held  by 
the  Secretary  of  the  Treasury  and  disposed  of  for  the  benefit  of 
the  United  States  in  such  manner,  at  such  times,  and  at  such 
price,  not  less  than  par,  as  the  Secretary  of  the  Treasury  shall 
determine. 

Stock  not  held  by  member  banks  shall  not  be  entitled  to  voting 
power.     (Sec.  2,  Act  Dec.  23,  1913.) 


§  200.  Same  Subject — Transfers.— The  Federal  Reserve  Board 


203 


is  hereby  empowered  to  adopt  and  promulgate  rules  and  regulations 
governing  the  transfers  of  said  stocks.     (Sec.  2,  Act  Dec.  23,  1913.) 


§  201.  Minimum  Capital  Stock  of  Reserve  Bank — Status  of  Re- 
serve and  Central  Reserve  Cities — Expenses  of  Organization  Com- 
mittee.— ISTo  Federal  reserve  bank  shall  commence  business  with  a 
subscribed  capital  less  than  $-1,000,000.  The  organization  of  re- 
serve districts  and  Federal  reserve  cities  shall  not  be  construed  as 
changing  the  present  status  of  reserve  cities  and  central  reserve 
cities,  except  in  so  far  as  this  Act  changes  the  amount  of  reserves 
that  may  be  carried  with  approved  reserve  agents  located  therein. 
The  organization  committee  shall  have  power  to  appoint  such  assis- 
tants and  incur  such  expenses  in  carrying  out  the  provisions  of  this 
Act  as  it  shall  deem  necessary,  and  such  expenses  shall  be  payable 
by  the  Treasurer  of  the  United  States  upon  voucher  approved  by 
the  Secretary  of  the  Treasury,  and  the  sum  of  $100,000,  or  so 
much  thereof  as  may  be  necessary,  is  hereby  appropriated,  out  of 
any  moneys  in  the  Treasury  not  otherwise  appropriated,  for  the 
payment  of  such  expenses.     (Sec.  2,  Act  Dec.  23,  1913.) 

§  202.  Branch  Offices  of  Reserve  Banks.— The  Federal  Re- 
serve Board  may  permit  or  require  any  Federal  reserve  bank 
to  establish  branch  banks  within  the  Federal  reserve  district  in 
which  it  is  located  or  within  the  district  of  any  Federal  reserve 
bank  which  may  have  been  suspended.  Such  branches,  subject 
to  such  rules  and  regulations  as  the  Federal  Eeserve  Board  may 
prescribe,  shall  be  operated  upon  the  supervision  of  a  board  of 
directors,  to  consist  of  not  more  than  seven  nor  less  than  three 
directors,  to  whom  a  majority  of  one  shall  be  appointed  by  the 
Federal  reserve  bank  of  the  district,  and  the  remaining  directors 
by  the  Federal  Reserve  Board.  Directors  of  branch  banks  shall 
hold  office  during  the  pleasure  of  the  Federal  Reserve  Board.  (Sec. 
3,  Act  Dec.  23,  1913,  as  amended  by  Act  June  21,  1917;  40 
Stat.  L.,  232.) 


204 


Branches  of  Federal  Reserve  Banks. — List  of  at  date  Of  this  publi- 
cation. 


Federal      Re- 

Brandies  at 

Federal      Re- 

Branches at 

serve  Bank  of 

serve  Bank  of 

New  York 

Buffalo 

Minneapolis 

Helena 

Cleveland 

Cincinnati  &  Pitts- 

Kansas City 

Omaha,  Denver  & 

burgh 

Oklahoma  City. 

Richmond 

Baltimore 

Dallas 

El  Paso  &  Houston 

Atlanta 

New  Orleans,  Jack- 

iSan Francisco 

sonville,       Bir- 

Los  Angeles,    Port- 

mingham     and 

land,  Salt  Lake 

Nashville 

City,  Seattle  & 

Chicago 

Detroit 

Spokane 

St.  Louis 

Louisville,  Memphis 
and  Little  Rock 

§  203.  Organization  of  Reserve  Banks.—  When  the  organization 
committee  shall  have  established  Federal  reserve  districts  as  pro- 
vided in  section  two  of  this  Act,  a  certificate  shall  be  filed  with 
the  Comptroller  of  the  Currency  showing  the  geographical  limits 
of  such  districts  and  the  Federal  reserve  city  designated  in  each 
of  such  districts.  The  Comptroller  of  the  Currency  shall  there- 
upon cause  to  be  forwarded  to  each  National  bank  located  in 
each  district,  and  to  such  other  banks  declared  to  be  eligible  by 
the  organization  committee  which  may  apply  therefor,  an  applica- 
tion blank  in  form  to  be  approved  by  the  organization  committee, 
which  blank  shall  contain  a  resolution  to  be  adopted  by  the  board 
of  directors  of  each  bank  executing  such  application,  authorizing 
a  subscription  to  the  capital  stock  of  the  Federal  reserve  bank 
organizing  in  that  district  in  accordance  with  the  provisions  of 
this  Act. 

When  the  minimum  amount  of  capital  stock  prescribed  by  this 
Act  for  the  organization  of  any  Federal  reserve  bank  shall  have 
been  subscribed  and  allotted,  the  organization  committee  shall 
designate  any  five  banks  of  those  whose  applications  have  been  re- 
ceived, to  execute  a  certificate  of  organization,  and  thereupon  the 
banks  so  designated  shall,  under  their  seals,  make  an  organization 


205 

certificate  which  shall  specifically  state  the  name  of  such  Federal 
reserve  bank,  the  territorial  extent  of  the  district  over  which  the 
operations  of  such  Federal  reserve  bank  are  to  be  carried  on,  the 
city  and  State  in  which  said  bank  is  to  be  located,  the  amount  of 
capital  stock  and  the  number  of  shares  into  which  the  same  is 
divided,  the  name  and  place  of  doing  business  of  each  bank  exe- 
cuting such  certificate,  and  of  all  banks  which  have  subscribed  to 
the  capital  stock  of  such  Federal  reserve  bank  and  the  number  of 
shares  subscribed  by  each,  and  the  fact  that  the  certificate  is  made 
to  enable  those  banks  executing  same,  and  all  banks  which  have 
subscribed  or  may  thereafter  subscribe  to  the  capital  stock  of 
such  Federal  reserve  bank,  to  avail  themselves  of  the  advantages 
of  this  Act. 

The  said  organization  certificate  shall  be  acknowledged  before  a 
judge  of  some  court  of  record  or  notary  public;  and  shall  be,  to- 
gether with  the  acknowledgment  thereof,  authenticated  by  the  seal 
of  such  court,  or  notar}^,  transmitted  to  the  Comptroller  of  the 
Currency,  who  shall  file,  record  and  carefully  preserve  the  same 
in  his  office.     (Sec.  4,  Act  Dec.  23,  1913.) 

§  204.  Corporate  Powers  of  Reserve  Banks.—  Upon  the  filing 
of  such  certificate  with  the  Comptroller  of  the  Currency  as  afore- 
said, the  said  Federal  reserve  bank  shall  become  a  body  corporate 
and  as  such,  and  in  the  name  designated  in  such  organization  cer- 
tificate, shall  have  power — 

First.   To  adopt  and  use  a  corporate  seal. 

Second.  To  have  succession  for  a  period  of  twenty  years  from  its 
organization  unless  it  is  sooner  dissolved  by  an  Act  of  Congress, 
or  unless  its  franchise  becomes  forfeited  by  some  violation  of  law. 

Third.  To  make  contracts. 

Fourth.  To  sue  and  be  sued,  complain  and  defend,  in  any  court 
of  law  or  equity. 

Fifth.  To  appoint  by  its  board  of  directors,  such  officers  and 
employees  as  are  not  otherwise  provided  for  in  this  Act,  to  define 
their  duties,  require  bonds  of  them  and  fix  the  penalty  thereof,  and 
to  dismiss  at  pleasure  such  officers  or  employees. 

Sixth.    To  prescribe  by  its  board  of  directors,  by-laws  not  in- 


206 

consistent  with  law,  regulating  the  manner  in  which  its  general 
business  may  be  conducted,  and  the  privileges  granted  to  it  by  law 
may  be  exercised  and  enjoyed. 

Seventh.  To  exercise  by  its  board  of  directors,  or  duly  author- 
ized officers  or  agents,  all  powers  specifically  granted  by  the  pro* 
visions  of  this  Act  and  such  incidental  powers  as  shall  be  necessary 
to  carry  on  the  business  of  banking  within  the  limitations  pre- 
scribed by  this  Act. 

Eighth.  Upon  deposit  with  the  Treasurer  of  the  United  States 
of  any  bonds  of  the  United  States  in  the  manner  provided  by  ex- 
isting laws  relating  to  National  banks,  to  receive  from  the  Comp- 
troller of  the  Currency  circulating  notes  in  blank,  registered  and 
countersigned  as  provided  by  law,  equal  in  amount  to  the  par 
value  of  the  bonds  so  deposited,  such  notes  to  be  issued  under  the 
same  conditions  and  provisions  of  law  as  relate  to  the  issue  of 
circulating  notes  of  National  banks  secured  by  bonds  of  the  United 
States  bearing  the  circulating  privilege,  except  that  the  issue  of 
such  notes  shall  not  be  limited  to  the  capital  stock  of  such  Federal 
reserve  bank. 

But  no  Federal  reserve  bank  shall  transact  any  business  except 
such  as  is  incidental  and  necessarily  preliminary  to  its  organiza- 
tion until  it  has  been  authorized  by  the  Comptroller  of  the  Cur- 
rency to  commence  business  under  the  provisions  of  this  Act.  (Sec. 
4,  Act  Dec.  23,  1913.) 

Officers  and  Clerks  of  Reserve  Banks. — Appointments  of  clerks 
of  Federal  Reserve  Banks  may  be  for  an  indefinite  period,  provided 
they  are  subject  to  the  pleasure  of  the  board  of  directors.  Officers 
should,  however,  be  appointed  from  year  to  year  and  their  salaries, 
as  well  as  those  of  clerks,  are  subject  to  the  annual  approval  of  the 
Federal  Reserve  Board.     (Informal  Ruling  of  Board,  Jan.  6,  1916.) 

Money  Order  Business. — There  is  no  authority  under  the  law  for 
Federal  Reserve  Banks  to  engage  in  the  money  order  business.  (In- 
formal Ruling  of  Board,  June  17,  1915.) 

§  205.  Duties  of  Directors  of  Reserve  Banks.— Every  Federal 
reserve  bank  shall  be  conducted  under  the  supervision  and  control 
of  a  board  of  directors. 


207 

The  board  of  directors  shall  perform  the  duties  usually  apper- 
taining to  the  office  of  directors  of  banking  associations  and  all 
such  duties  as  are  prescribed  by  law. 

Said  board  shall  administer  the  affairs  of  said  bank  fairly  and 
impartially  and  without  discrimination  in  favor  of  or  against  any 
member  bank  or  banks  and  shall,  subject  to  the  provisions  of  law 
and  the  orders  of  the  Federal  Reserve  Board,  extend  to  each  mem- 
ber bank  such  discounts,  advancements  and  accommodations  as 
may  be  safely  and  reasonably  made  with  due  regard  for  the  claims 
and  demands  of  other  member  banks.     (Sec.  4,  Act  Dec.  23,  1913.) 

§  206.  Classification  of  Directors  of  Reserve  Banks. — Such 
board  of  directors  shall  be  selected  as  hereinafter  specified  and 
shall  consist  of  nine  members,  holding  office  for  three  years,  and 
divided  into  three  classes,  designated  as  classes  A,  B,  and  C. 

Class  A  shall  consist  of  three  members,  who  shall  be  chosen  by 
and  be  representative  of  the  stock-holding  banks. 

Class  B  shall  consist  of  three  members,  who  at  the  time  of  their 
election  shall  be  actively  engaged  in  their  district  in  commerce, 
agriculture  or  some  other  industrial  pursuit. 

Class  C  shall  consist  of  three  members  who  shall  be  designated 
by  the  Federal  Eeserve  Board.  When  the  necessary  subscriptions 
to  the  capital  stock  have  been  obtained  for  the  organization  of  any 
Federal  reserve  bank,  the  Federal  Reserve  Board  shall  appoint  the 
class  C  directors  and  shall  designate  one  of  such  directors  as  chair- 
man of  the  board  to  be  selected.  Pending  the  designation  of  such 
chairman,  the  organization  committee  shall  exercise  the  powers 
and  duties  appertaining  to  the  office  of  chairman  in  the  organiza- 
tion of  such  Federal  reserve  bank.     (Sec.  4,  Act  Dec.  23,  1913.) 

Class  A  Directors — Residents  of  District. — The  words  "representa- 
tive of  the  stock  holding  banks"  mean  that  Class  A  directors  must 
reside  in  the  district  for  which  they  are  elected.  (Informal  Ruling 
of  Board,  Oct.  1G,  191G.) 

§  207.  Qualifications  of  Directors  of  Federal  Reserve  Banks. — 
No  Senator  or  Representative  in  Congress  shall  be  a  member  of 


208 

the  Federal  Reserve  Board  or  an  officer  or  a  director  of  a  Federal 
reserve  bank. 

No  director  of  class  B  shall  be  an  officer,  director,  or  employee 
of  any  bank. 

No  director  of  class  C  shall  be  an  officer,  director,  employee,  or 
stockholder  of  any  bank.     (Sec.  4,  Act  Dec.  23,  1913.) 

National  Bank  Examinees  as  Directors. — Election  or  appointment 
of  National  bank  examiners  to  directorships  in  Federal  Reserve  Banks 
is  against  the  policy  of  the  Bo'ard.  (Resolution  of  Board,  Dec.  28, 
1915.) 

§  208.  Election  of  "Class  A"  and  "Class  B"  Directors.— Direc- 
tors of  class  A  and  class  B  shall  be  chosen  in  the  following  manner : 

The  Federal  Eeserve  Board  shall  classify  the  member  banks  of 
the  district  into  three  general  groups  or  divisions,  designating 
each  group  by  number.  Each  group  shall  consist  as  nearly  as 
may  be  of  banks  of  similar  capitalization.  Each  member  bank 
shall  be  permitted  to  nominate  to  the  chairman  of  the  board  of 
directors  of  the  Federal  reserve  bank  of  the  district  one  candidate 
for  director  of  class  A  and  one  candidate  for  director  of  class 
B.  The  candidates  so  nominated  shall  be  listed  by  the  chairman, 
indicating  by  whom  nominated,  and  a  copy  of  said  list  shall, 
within  fifteen  days  after  its  completion,  be  furnished  by  the 
chairman  to  each  member  bank.  Each  member  bank  by  a  resolu- 
tion of  the  board  or  by  an  amendment  to  its  by-laws  shall  author- 
ize its  president,  cashier,  or  some  other  officer  to  cast  the  vote  of 
the  member  bank  in  the  elections  of  class  A  and  class  B  directors. 

Within  fifteen  days  after  receipt  of  the  list  of  candidates  the 
duly  authorized  officer  of  a  member  bank  shall  certify  to  the 
chairman  his  first,  second,  and  other  choices  for  director  of  class 
A  and  class  B,  respectively,  upon  a  preferential  ballot  upon  a 
form  furnished  by  the  chairman  of  the  board  of  directors  of  the 
Federal  reserve  bank  of  the  district.  Each  such  officer  shall  make 
a  cross  opposite  the  name  of  the  first,  second,  and  other  choices 
for  a  director  of  class  A  and  for  a  director  of  class  B,  but  shall 
not  vote  more  than  one  choice  for  any  one  candidate.  No  officer 
or  director  of  a  member  bank  shall  be  eligible  to  serve  as  a  class 


209 

A  director  unless  nominated  and  elected  by  banks  which  are 
members  of  the  same  group  as  the  member  bank  of  which  he  is  an 
officer  or  director. 

Any  person  who  is  an  officer  or  director  of  more  than  one  mem- 
ber bank  shall  not  be  eligible  for  nomination  as  a  class  A  director 
except  by  banks  in  the  same  group  as  the  bank  having  the  largest 
aggregate  resources  of  any  of  those  of  which  such  person  is  an 
officer  or  director. 

Any  candidate  having  a  majority  of  all  votes  cast  in  the  column 
of  first  choice  shall  be  declared  elected.  If  no  candidate  has  a 
majority  of  all  the  votes  in  the  first  column,  then  there  shall  be 
added  together  the  votes  cast  by  the  electors  for  such  candidates  in 
the  second  column  and  the  votes  cast  for  the  several  candidates 
in  the  first  column.  If  any  candidate  then  has  a  majority  of 
the  electors  voting,  by  adding  together  the  first  and  second  choices, 
he  shall  be  declared  elected.  If  no  candidate  has  a  majority  of 
electors  voting  when  the  first  and  second  choices  shall  have  been 
added,  then  the  votes  cast  in  the  third  column  for  other  choices 
shall  be  added  together  in  like  manner,  and  the  candidate  then 
having  the  highest  number  of  votes  shall  be  declared  elected.  An 
immediate  report  of  election  shall  be  declared.  (Sec.  4,  Act  Dec. 
23,  1913,  as  amended  by  Sec.  1,  Act  Sept.  3/6,  1918;  40  Stat. 
L.,  967.) 

Nomination  of  Directors — Certification  of  Choices. — The  right 
of  a  member  bank  to  nominate  a  candidate  for  director  is  permissive 
under  the  terms  of  section  4  and  not  mandatory. 

It  is  the  duty  of  every  duly  authorized  officer,  after  receipt  of 
the  list  of  candidates,  to  certify  to  the  chairman  his  first,  second,  and 
other  choices.  The  law  in  this  connection  is  mandatory  and  not  per- 
missive, it  evidently  being  specified  in  order  that  there  may  be  no 
possibility  of  a  failure  to  elect.  Inasmuch,  however,  as  member  banks 
are  not  obliged  to  nominate  a  candidate,  it  is  possible  that  there 
may  be  less  than  three  nominees,  and  in  such  case  vote  can  be  made 
for  only  first  and  second  choices,  or  if  only  one  nominee  only  first 
choice.  There  is  no  inconsistency,  however,  in  requiring  a  first,  second, 
and  third  choice  vote  when  there  are  three  or  more  candidates.  Both 
the  spirit  and  the  letter  of  the  act  require  this.  (Ruling  of  Board, 
Oct.  13,  191G.) 
14 


210 

§  209.  Appointment  of  "Class  C"  Directors — Designation  of 
Federal  Reserve  Agents,  Deputy  Federal  Eeserve  Agents  and 
Assistants. — Class  C  directors  shall  be  appointed  by  the  Federal 
Eeserve  Board.  They  shall  have  been  for  at  least  two  years  resi- 
dents of  the  district  for  which  they  are  appointed,  one  of  whom 
shall  be  designated  by  said  board  as  chairman  of  the  board  of 
directors  of  the  Federal  reserve  bank  and  as  "Federal  reserve 
agent."  He  shall  be  a  person  of  tested  banking  experiences,  and- 
in  addition  to  his  duties  as  chairman  of  the  board  of  directors 
of  the  Federal  reserve  bank  he  shall  be  required  to  maintain,  under 
regulations  to  be  established  by  the  Federal  Eeserve  Board,  a  local 
office  of  said  board  on  the  premises  of  the  Federal  reserve  bank. 
He  shall  make  regular  reports  to  the  Federal  Eeserve  Board  and 
shall  act  as  its  official  representative  for  the  performance  of  the 
functions  conferred  upon  it  by  this  Act.  He  shall  receive  an  an- 
nual compensation  to  be  fixed  by  the  Federal  Eeserve  Board  and 
paid  monthly  by  the  Federal  reserve  bank  to  which  he  is  desig- 
nated. One  of  the  directors  of  class  C  shall  be  appointed  by  the 
Federal  Eeserve  Board  as  deputy  chairman  to  exercise  the  powers 
of  the  chairman  of  the  board  when  necessary.  In  case  of  the 
absence  of  the  chairman  and  deputy  chairman,  the  third  class  C 
director  shall  preside  at  meetings  of  the  board. 

Subject  to  the  approval  of  the  Federal  Eeserve  Board,  the 
Federal  reserve  agent  shall  appoint  one  or  more  assistants.  Such 
assistants,  who  shall  be  persons  of  tested  banking  experience, 
shall  assist  the  Federal  reserve  agent  in  the  performance  of  his 
duties  and  shall  also  have  power  to  act  in  his  name  and  stead 
during  his  absence  or  disability.  The  Federal  Eeserve  Board 
shall  require  such  bonds  of  the  assistant  Federal  reserve  agents 
as  it  may  deem  necessary  for  the  protection  of  the  United  States. 
Assistants  to  the  Federal  reserve  agent  shall  receive  an  annual 
compensation,  to  be  fixed  and  paid  in  the  same  manner  as  that 
of  the  Federal  reserve  agent.  (Sec.  4,  Act  Dec.  23,  1913,  as 
amended  by  Sec.  2,  Act  June  21,  1917;  40  Stat.  L.,  232.) 

Payments  to  Deputy  Federal  Reserve  Agents. — No  payment  should 
be  made  to  Deputy  Federal  Reserve  Agents  except  for  official  services 


211 

to  the  banks  at  the  request,  in  writing,  of  the  Federal  Reserve  Agent 
or  board  of  directors.  This  does  net  affect  directors'  fees.  (Informal 
Ruling  of  Board,  Oct.  6,  1915.) 

Qualifications  of  Federal  Reserve  Bank  Directors. — A  director 
possessing  necessary  qualifications  at  the  time  of  his  election  is  not 
made  ineligible  to  serve  out  his  term  by  a  change  in  the  geographical 
limits  of  his  district  which  results  in  making  him  a  resident  of  another 
district.     (Opinion  of  Counsel  of  Board,  May  11,  1915.) 

Class  C  Directors — Executive  Committee. — There  is  no  objection  to 
Class  C  directors  serving  as  members  of  the  executive  committees  of 
Federal  Reserve  Banks.     (Informal  Ruling  of  Board,  July,  1915.) 

Eligibility  of  Class  C  Directors  for  All  Appointments. — Class  C 
directors  of  Federal  Reserve  Banks  are  eligible  to  the  same  appoint- 
ment and  duties  as  Class  A  and  Class  B  directors.  (Informal  Ruling 
of  Board,  Jan.  14,  1916.) 

§  210.  Compensation  of  Directors  of  Reserve  Banks—  Directors 
of  Federal  reserve  banks  shall  receive,  in  addition  to  any  compensa- 
tion otherwise  provided,  a  reasonable  allowance  for  necessary  ex- 
penses in  attending  meetings  of  their  respective  boards,  which 
amount  shall  be  paid  by  the  respective  Federal  reserve  banks.  Any 
compensation  that  may  be  provided  by  boards  of  directors  of 
Federal  reserve  banks  for  directors,  officers  or  employees  shall  be 
subject  to  the  approval  of  the  Federal  Reserve  Board.  (Sec.  4, 
Act  Dec.  23,  1913.) 

§  211.  Powers  of  Organization  Committee — Reserve  Bank  Di- 
rectors.— The  Reserve  Bank  Organization  Committee  may,  in  or- 
ganizing Federal  reserve  banks,  call  such  meetings  of  bank  direc- 
tors in  the  several  districts  as  may  be  necessary  to  carry  out  the 
purposes  of  this  Act,  and  may  exercise  the  functions  herein  con- 
ferred upon  the  chairman  of  the  board  of  directors  of  each  Federal 
reserve  bank  pending  the  complete  organization  of  such  bank. 
(Sec.  4,  Act  Dec.  23,  1913.) 

§  212.  Terms  of  Directors  of  Reserve  Banks— Filling  of  Va- 
cancies.-At  the  first  meeting  of  the  full  board  of  directors  of 


212 

each  Federal  reserve  bank,  it  shall  be  the  duty  of  the  directors 
of  classes  A,  B,  and  C,  respectively,  to  designate  one  of  the  mem- 
bers of  each  class  whose  term  of  office  shall  expire  in  one  year 
from  the  first  of  January  nearest  to  date  of  such  meeting,  one 
whose  term  of  office  shall  expire  at  the  end  of  two  years  from  said 
date,  and  one  whose  term  of  office  shall  expire  at  the  end  of  three 
years  from  said  date.  Thereafter  every  director  of  a  Federal  re- 
serve bank  chosen  as  hereinbefore  provided  shall  hold  office  for  a 
term  of  three  years.  Vacancies  that  may  occur  in  the  several 
classes  of  directors  of  Federal  reserve  banks  may  be  filled  in  the 
manner  provided  for  the  original  selection  of  such  directors,  such 
appointees  to  hold  office  for  the  unexpired  terms  of  their  prede- 
cessors.    (Sec.  4,  Act  Dec.  23,  1913.) 

Holding  Oveb  of  Federal  Reserve  Bank  Directors. — A  director  of 
la  Federal  Reserve  Bank  has  no  authority  to  continue  to  serve  as  such 
after  the  expiration  of  his  term  even  though  his  successor  has  not 
been  elected.     (Opinion  of  Counsel  of  Board,  March  23,  1917.) 

§  213.  Stock  Issues — Increase,  Decrease  and  Cancellation  of 
Capital  of  Reserve  Banks.—  The  capital  stock  of  each  Federal  re- 
serve bank  shall  be  divided  into  shares  of  $100  each.  The  out- 
standing capital  stock  shall  be  increased  from  time  to  time  as 
member  banks  increase  their  capital  stock  and  surplus  or  as  ad- 
ditional banks  become  members,  and  may  be  decreased  as  member 
banks  reduce  their  capital  stock  or  surplus  or  cease  to  be  members. 
Shares  of  the  capital  stock  of  Federal  reserve  banks  owned  by 
member  banks  shall  not  be  transferred  or  hypothecated.  When  a 
member  bank  increases  its  capital  stock  or  surplus,  it  shall  there- 
upon subscribe  for  an  additional  amount  of  capital  stock  of  the 
Federal  reserve  bank  of  its  district  equal  to  six  per  centum  of  the 
said  increase,  one-half  of  said  subscription  to  be  paid  in  the  man- 
ner hereinbefore  provided  for  original  subscription,  and  one-half 
subject  to  call  of  the  Federal  Eeserve  Board.  A  bank  applying 
for  stock  in  a  Federal  reserve  bank  at  any  time  after  the  or- 
ganization thereof  must  subscribe  for  an  amount  of  the  capital 
stock  of  the  Federal  reserve  bank  equal  to  six  per  centum  of  the 
paid-up  capital  stock  and  surplus  of  said  applicant  bank,  paying 


213 

therefor  its  par  value  plus  one-half  of  one  per  centum  a  month 
from  the  period  of  the  last  dividend.  When  the  capital  stock  of 
any  Federal  reserve  bank  shall  have  been  increased  either  on  ac- 
count of  the  increase  of  capital  stock  of  member  banks  or  on 
account  of  the  increase  in  the  number  of  member  banks,  the  board 
of  directors  shall  cause  to  be  executed  a  certificate  to  the  Comp- 
troller of  the  Currency  showing  the  increase  in  capital  stock,  the 
amount  paid  in,  and  by  whom  paid.  When  a  member  bank  re- 
duces its  capital  stock  it  shall  surrender  a  proportionate  amount 
of  its  holdings  in  the  capital  of  said  Federal  reserve  bank,  and 
when  a  member  bank  voluntarily  liquidates  it  shall  surrender  all 
of  its  holdings  of  the  capital  stock  of  said  Federal  reserve  bank  and 
be  released  from  its  stock  subscription  not  previously  called.  In 
either  case  the  shares  surrendered  shall  be  cancelled  and  the  mem- 
ber bank  shall  receive  in  payment  therefor,  under  regulations  to  be 
prescribed  by  the  Federal  Reserve  Board,  a  sum  equal  to  its  cash- 
paid  subscriptions  on  the  shares  surrendered  and  one-half  of  one 
per  centum  a  month  from  the  period  of  the  last  dividend,  not  to 
exceed  the  book  value  thereof,  less  any  liability  of  such  member 
bank  to  the  Federal  reserve  bank. 

If  any  member  bank  shall  be  declared  insolvent  and  a  re- 
ceiver appointed  therefor,  the  stock  held  by  it  in  said  Federal 
reserve  bank  shall  be  cancelled,  without  impairment  of  its  liability, 
and  all  cash-paid  subscriptions  on  said  stock,  with  one-half  of  one 
per  centum  per  month  from  the  period  of  last  dividend,  not  to 
exceed  the  book  value  thereof,  shall  be  first  applied  to  all  debts  of 
the  insolvent  member  bank  to  the  Federal  reserve  bank,  and  the 
balance,  if  any,  shall  be  paid  to  the  receiver  of  the  insolvent  bank. 
Whenever  the  capital  stock  of  a  Federal  reserve  bank  is  reduced, 
either  on  account  of  a  reduction  in  capital  stock  of  any  member 
bank  or  of  the  liquidation  or  insolvency  of  such  bank,  the  board 
of  directors  shall  cause  to  be  executed  a  certificate  to  the  Comp- 
troller of  the  Currency  showing  such  reduction  of  capital  stock  and' 
the  amount  repaid  to  6uch  bank.    (Sec.  5  and  6,  Act  Dec.  23,  1913.) 

Regulation  I  of  Fedebal  Reserve  Boabd,  Series  of  1917  (Supersed- 
ing Reg.  I  of  1916).— 


214 

INCREASE  OF  CAPITAL  STOCK. 

Whenever  the  capital  stock  of  any  Federal  Reserve  Bank  shall  be 
increased  by  new  banks  becoming  members,  or  by  the  increase  of 
capital  or  surplus  of  any  member  bank  and  the'  allotment  of  additional 
capital  stock  to  such  bank,  the  board  of  directors  of  such  Federal  Re- 
serve Bank  shall  certify  such  increase  to  the  Comptroller  of  the  Cur- 
rency on  Form  58,  which  is  made  a  part  of  this  regulation. 

DECREASE  OF  CAPITAL  STOCK. 

I.  "Whenever  a  member  bank  reduces  its  capital  stock  or  surplus, 
and,  in  the  case  of  reduction  of  its  capital,  such  reduction  has  been 
approved  by  the  Comptroller  of  the  Currency  and  by  the  Federal  Re- 
serve Board  in  accordance  with  the  provisions  of  section  28  of  the 
Federal  Reserve  Act,  it  shall  file  with  the  Federal  Reserve  Bank  of 
which  it  is  a  member  an  application  on  Form  60,  which  is  made  a 
part  of  this  regulation.  When  this  application  has  been  approved,  the 
Federal  Reserve  Bank  shall  take  up  and  cancel  the  receipt  issued  to' 
such  bank  for  cash  payments  made  on  its  subscription  and  shall  issue 
in  lieu  thereof  a  new  receipt  after  refunding  to  the  member  bank  the 
proportionate  amount  due  such  bank  on  account  of  the  subscription 
canceled.  The  receipt  so  issued  shall  show  the  date  of  original  issue, 
sO  that  dividends  may  be  calculated  thereon. 

II.  Whenever  a  member  bank  shall  be  declared  insolvent  and  a  re- 
ceiver appointed  by  the  proper  authorities,  such  receiver  shall  file 
with  the  Federal  Reserve  Bank  of  which  the  insolvent  bank  is  a 
member  an  application  on  Form  87,  which  is  made  a  part  of  this  regu- 
lation, for  the  surrender  and  cancellation  of  the  stock  held  by,  and 
for  the  refund  of  all  balances  due  to'  such  insolvent  member  bank. 
Upon  approval  of  this  application  by  the  Federal  Reserve  Agent  the 
Federal  Reserve  Bank  shall  accept  and  cancel  the  stock  surrendered, 
and  shall  adjust  accounts  between  the  member  bank  and  the  Federal 
Reserve  Bank  by  applying  to  the  indebtedness  of  the  insolvent  member 
bank  to  such  Federal  Reserve  Bank  all  cash-paid  subscriptions  made 
by  it  on  the  stock  canceled  with  one-half  of  1  per  centum  per  month 
from  the  period  of  last  dividend,  if  earned,  not  to  exceed  the  book 
value  thereof,  and  the  balance,  if  any,  shall  be  paid  to  the  duly  au- 
thorized receiver  of  such  insolvent  member  bank. 

III.  Whenever  a  member  bank  goes  into  voluntary  liquidation  and 
a  liquidating  agent  is  appointed,  such  agent  shall  file  with  the  Federal 
Reserve  Bank  of  which  it  is  a  member  an  application  on  Form  86, 
which  is  made  a  part  of  this  regulation,  for  the  surrender  and  can- 


215 

cellation  of  the  stock  held  by  and  for  the  refund  of  all  balances  due 
to  such  liquidating  member  bank.  Upon  approval  of  this  application 
by  the  Federal  Reserve  Agent  the  Federal  Reserve  Bank  shall  accept 
and  cancel  the  stock  surrendered,  and  shall  adjust  accounts  between 
the  liquidating  member  bank  and  the  Federal  Reserve  Bank  by  apply- 
ing to  the  indebtedness  of  the  liquidating  member  bank  to  such  Fed- 
eral Reserve  Bank  all  cash-paid  subscriptions  made  by  it  on  the  stock 
canceled  with  one-half  of  1  per  centum  per  month  from  the  period 
of  last  dividend,  if  earned,  not  to  exceed  the  book  value  thereof,  and 
the  balance,  if  any,  shall  be  paid  to  the  duly  authorized  liquidating 
agent  of  such  liquidating  member  bank. 

IV.  Whenever  the  stock  of  a  Federal  Reserve  Bank  shall  be  reduced 
in  the  manner  provided  in  Paragraphs  I,  II,  or  III  of  this  regulation 
the  board  of  directors  of  such  Federal  Reserve  Bank  shall,  in  accord- 
ance with  the  provisions  of  section  6,  file  with  the  Comptroller  of  the 
Currency  a  certificate  of  such  reduction  on  Form,  59,  which  is  made 
a  part  of  this  regulation. 

Forms  58  and  59  apply  only  to  Federal  reserve  banks.  Forms  60 
and  87  are  for  use  by  member  banks  and  will  be  forwarded  by  their 
respective  reserve  banks  upon  request. 

SUERENDEB  OF  STOCK  BY  A  MEMBEE  BANK  REDUCING  ITS   SURPLUS. — The 

Federal  Reserve  Act  does  not  require  that  a  member  bank  neecessarily 
surrender  a  proportionate  part  of  its  stock  in  the  Federal  Reserve  Bank 
of  which  it  is  a  member  when  it  reduces  its  surplus.  Such  surrender  is 
left  to  the  discretion  of  the  Federal  Reserve  Bank,  subject  to  the  ap- 
proval of  the  Federal  Reserve  Board.  (Opinion  of  Counsel  of  Board, 
June  17,  1915.) 

Liquidation  of  a  Membee  Bank. — A  vote  of  more  than  two-thirds 
of  the  stockholders  of  a  National  bank  ratifying  a  sale  of  its  assets  to 
fanother  corporation  is  not  a  vote  to  go  into  liquidation  as  required 
by  the  Revised  Statutes  of  the  United  States.  A  Federal  Reserve  Bank 
can  not,  under  those  facts,  cancel  the  shares  of  its  stock  held  by  such 
member  bank,  nor  can  it  refund  to  the  member  bank  the  amount  of 
its  cash-paid  subscriptions  to  such  stock.  (Opinion  of  Counsel  of 
Board,  Jan.  20,  1916.) 

Applications  to  Reduce  Stock. — When  a  member  bank  desires  to 
reduce  its  capital  stock,  the  application  should  be  sent  to  the  Federal 
Reserve  Bank  of  the  district  which  will  present  the  matter  to  the 
Comptroller  of  the  Currency  and  the  Federal  Reserve  Board.  (In- 
formal Ruling  of  Board,  June  2,  1915.) 


216 

Duplicate  Certificates. — Certificates  of  increase  and  decrease  of 
capital  stock  in  member  banks  are  to  be  made  in  duplicate  and  copies 
mailed  both  to  the  Federal  Reserve  Board  and  the  Comptroller  of  the 
Currency.     (Informal  Ruling  of  Board,  July,  1915.) 

Identification  of  Bank  as  Member. — A  member  bank  becomes  ac- 
tively identified  with  the  Federal  Reserve  System  when  its  stock  in 
the  Federal  Reserve  Bank  has  been  issued  and  paid  for,  and  the  re- 
quired reserve  deposited.     (Informal  Ruling  of  Board,  Aug.  11,  1915.) 

Application  for  Additional  Stock — Certificate  of  Comptroller  of 
Currency. — In  considering  applications  of  member  banks  for  addi- 
tional stock  in  Federal  Reserve  Banks,  the  Federal  Reserve  Board  will 
not  hereafter  require  a  certificate  from  the  Comptroller  of  the  Cur- 
rency as  to  the  amount  of  capital  and  surplus  of  the  applying  bank. 
(Informal  Ruling  of  Board,  Nov.  27,  1915.)  Applications  should  be 
filed  with  the  proper  Federal  Reserve  Bank  and  will  be  considered 
quarterly,  i.  e.,  on  the  first  of  January,  April,  July  and  October.  (In- 
formal Ruling  of  Board,  March  13,  1915.) 

Transfer  of  Federal  Reserve  Bank  Stock. — A  National  bank  acquir- 
ing assets  of  another  National  bank  in  liquidation  is  not  entitled  to 
have  transferred  to  it  the  Federal  Reserve  Bank  stock  held  by  the 
liquidating  bank.     (Opinion  of  Counsel  of  Board,  Feb.  3,  1917.) 

Conversion  of  a  State  Bank  Into  a  National  Bank. — In  view  of 
the  fact  that  the  conversion  of  a  State  into  a  National  bank  does  not 
destroy  the  corporate  identity  of  the  bank,  it  is  hardly  necessary  for 
the  State  bank  to  file  an  application  for  the  surrender  of  its  stock  or 
for  the  National  bank  to  file  an  application  for  new  stock.  (Informal 
Ruling  of  Board,  Aug.  2,  1917.) 

§  214.  Dividends  and  Surplus  of  Reserve  Banks.— After  all 
necessary  expenses  of  a  Federal  reserve  bank  have  been  paid  or 
provided  for,  the  stockholders  shall  be  entitled  to  receive  an  an- 
nual dividend  of  six  per  centum  on  the  paid-in  capital  stock, 
which  dividend  shall  be  cumulative. 

After  the  aforesaid  dividend  claims  have  been  fully  met,  the 
net  earnings  shall  be  paid  to  the  United  States  as  a  franchise 
tax  except  that  the  whole  of  such  net  earnings,  including  those 
for  the  year  ending  December  thirty-first,  nineteen  hundred  and 
eighteen,  shall  be  paid  into  a  surplus  fund  until  it  shall  amount 


217 

to  one  hundred  per  centum  of  the  subscribed  capital  stock  of 
such  bank,  and  that  thereafter  ten  per  centum  of  such  net  earn- 
ings shall  be  paid  into  the  surplus. 

The  net  earnings  derived  by  the  United  States  from  Federal  re- 
serve banks  shall,  in  the  discretion  of  the  Secretary,  be  used  to 
supplement  the  gold  reserve  held  against  outstanding  United  States 
notes,  or  shall  be  applied  to  the  reduction  of  the  outstanding 
bonded  indebtedness  of  the  United  States  under  regulations  to  be 
prescribed  by  the  Secretary  of  the  Treasury.  Should  a  Federal  re- 
serve bank  be  dissolved  or  go  into  liquidation,  any  surplus  remain- 
ing, after  the  payment  of  all  debts,  dividend  requirements  as  here- 
inbefore provided,  and  the  par  value  of  the  stock,  shall  be  paid  to 
and  become  the  property  of  the  United  States  and  shall  be 
similarly  applied.  (Sec.  7,  Act  Dec.  23,  1913,  as  amended  by 
Sec.  1,  Act  March  3,  1919;  40  Stat.  L.,  1314.) 

Payment  of  Dividends  to  Transferred  Member  Banks. — Where  mem- 
ber banks  have  been  transferred  from  one  district  to  another,  the  Re- 
serve Bank  of  the  district  from  which  the  transfer  is  made  is  liable 
to  such  member  banks  for  unpaid  dividends  up  to  the  date  of  transfer. 
(Informal  Ruling  of  Board,  Oct.  31,  1916.) 

Dividends  on  Surrendered  Stock. — Member  banks  surrendering  stock 
on  account  of  liquidation  or  reduction  in  capital  or  surplus  are  entitled 
to  cash-paid  subscriptions  plus  one-half  of  1  per  cent,  per  month  from 
date  of  subscription,  not  to  exceed  the  book  value  thereof.  If  surren- 
dered because  of  transfer  to  another  district,  member  banks  are  en- 
titled to  accrued  dividend  certificates.  (Opinion  of  Counsel  of  Board, 
Dec.  20,  1915.) 

Rights  of  Liquidating  National  Bank  to  Accrued  Dividends. — Any 
National  bank  which  liquidates  and  reorganizes  as  a  State  bank  for- 
feits its  rights  to  accrued  dividends  from  its  Federal  Reserve  Bank. 
Such  rights  do  not  survive  in  favor  of  such  State  bank  even  though 
it  immediately  becomes  a  member  bank.  (Opinion  of  Counsel  of 
Board,  Dec.  28,  1916.) 

Surrender  of  Stock  by  Liquidating  Bank. — When  a  member  bank 
voluntarily  liquidates,  or  when  it  is  declared  insolvent  and  a  receiver 
appointed,  the  stock  held  by  it  in  the  Federal  Reserve  Bank  must  be 
surrendered  for  cancellation.  (Informal  Ruling  of  Board,  May  14, 
1917.) 


218 

§  215.  Exemption  from  Taxation — Reserve  Banks.-  Federal 
reserve  banks,  including  the  capital  stock  and  surplus  therein,  and 
the  income  derived  therefrom  shall  be  exempt  from  Federal,  State, 
and  local  taxation,  except  taxes  upon  real  estate.  (Sec.  7,  Act 
Dec.  23,  1913.) 

Deduction  of  Federal  Reserve  Bank  Stock  from  Tax  Assessments 
Levied  on  Shareholders  of  Member  Banks. — Where  the  State  imposes 
a  tax  on  the  shares  of  a  bank,  whether  State  or  National,  as  the  prop- 
erty of  the  shareholder,  and  such  tax  ia  not  assessed  against  the  cor- 
iporation  as  such,  the  right  to  deduct  nontaxable  securities  in  making 
the  return  of  the  value  of  the  shares  for  taxation  has  not  been  recog- 
nized by  the  courts.  (Opinion  of  Counsel  of  Board,  Sept.  14,  1915;  First 
Nat.  Bank  v.  Beaman,  257  Fed.  Rep.,  729.) 

Stamp  Tax  on  Certificates  of  Stock. — Stock  issued  to  member  banks 
by  Federal  Reserve  Banks  is  exempt  from  the  stamp  tax  imposed  in 
Schedule  A  of  the  Act  of  October  22,  1914  (38  Stat,  759).  (Opinion 
of  Attorney  General,  March  10,  1916.) 

Stamp  Tax  on  Instruments  Issued  by  Reserve  Banks. — All  instru- 
ments and  things  mentioned  in  Schedule  A  of  act  approved  October  22, 
1914,  when  issued  by  Federal  Reserve  Banks  are  subject  to  tax.  This, 
however,  has  no  connection  with  opinion  of  November  28,  1914,  that 
capital  stock  of  Federal  Reserve  Banks  is  exempt  from  these  special 
taxes.     (Opinion  of  Solicitor  of  Internal  Revenue,  Feb.  15,  1915.) 

§  216.  Conversion  of  State  into  National  Banks-Sec  Sec.  31, 
page  45,  Part  I. 

§  217.  State  Banks  as  Members  —  Admission,  Restrictions, 
Suspension  and  Withdrawal. — Any  bank  incorporated  by  special 
law  of  any  State,  or  organized  under  the  general  laws  of  any  State 
or  of  the  United  States,  desiring  to  become  a  member  of  the  Fed- 
eral Reserve  Sjrstem,  may  make  application  to  the  Federal  Reserve 
Board,  under  such  rules  and  regulations  as  it  may  prescribe,  for 
the  right  to  subscribe  to  the  stock  of  the  Federal  reserve  bank 
organized  within  the  district  in  which  the  applying  bank  is  lo- 
cated. Such  application  shall  be  for  the  same  amount  of  stock 
that  the  applying  bank  would  be  required  to  subscribe  to  as  a 


219 

national  bank.  The  Federal  Eeserve  Board,  subject  to  such  condi- 
tions as  it  may  prescribe,  may  permit  the  applying  bank  to  be- 
come a  stockholder  of  such  Federal  reserve  bank. 

In  acting  upon  such  applications  the  Federal  Eeserve  Board 
shall  consider  the  financial  condition  of  the  applying  bank,  the 
general  character  of  its  management,  and  whether  or  not  the 
corporate  powers  exercised  are  consistent  with  the  purposes  of 
this  Act. 

Whenever  the  Federal  Eeserve  Board  shall  permit  the  apply- 
ing bank  to  become  a  stockholder  in  the  Federal  reserve  bank  of 
the  district  its  stock  subscription  shall  be  payable  on  call  of  the 
Federal  Eeserve  Board,  and  stock  issued  to  it  shall  be  held  sub- 
ject to  the  provisions  of  this  Act. 

All  banks  admitted  to  membership  under  authority  of  this 
section  shall  be  required  to  comply  with  the  reserve  and  capital 
requirements  of  this  Act  and  to  conform  to  those  provisions  of 
law  imposed  on  national  banks  which  prohibit  such  banks  from 
lending  on  or  purchasing  their  own  stock,  which  relate  to  the 
withdrawal  or  impairment  of  their  capital  stock,  and  which  re- 
late to  the  payment  of  unearned  dividends.  Such  banks  and  the 
officers,  agents,  and  employees  thereof  shall  also  be  subject  to  the 
provisions  of  and  to  the  penalties  prescribed  by  section  fifty-two 
hundred  and  nine  of  the  Eevised  Statutes,  and  shall  be  required 
to  make  reports  of  conditions  and  of  the  payment  of  dividends 
to  the  Federal  reserve  bank  of  which  they  become  a  member, 
not  less  than  three  of  such  reports  shall  be  made  annually  on 
call  of  the  Federal  reserve  bank  on  dates  to  be  fixed  by  the  Federal 
Eeserve  Board.  Failure  to  make  such  reports  within  ten  days 
after  the  date  they  are  called  for  shall  subject  the  offending  bank 
to  a  penalty  of  $100  a  day  for  each  day  that  it  fails  to  transmit 
such  report;  such  penalty  to  be  collected  by  the  Federal  reserve 
bank  by  suit  or  otherwise. 

As  a  condition  of  membership  such  banks  shall  likewise  be 
subject  to  examinations  made  by  direction  of  the  Federal  Eeserve 
Board  or  of  the  Federal  reserve  bank  by  examiners  selected  or 
approved  by  the  Federal  Eeserve  Board. 

Whenever  the  directors  of  the  Federal  reserve  bank  shall  ap- 


220 

prove  the  examinations  made  by  the  State  authorities,  such  ex- 
aminations and  the  reports  thereof  may  be  accepted  in  lieu  of 
examinations  made  by  examiners  selected  or  approved  by  the  Fed- 
eral Eeserve  Board:  Provided,  however,  That  when  it  deems  it 
necessary  the  board  may  order  special  examination  by  examiners 
of  its  own  selection  and  shall  in  all  cases  approve  the  form  of 
the  report.  The  expenses  of  all  examinations,  other  than  those 
made  by  State  authorities,  shall  be  assessed  against  and  paid  by 
the  banks  examined. 

If  at  any  time  it  shall  appear  to  the  Federal  Reserve  Board 
that  a  member  bank  has  failed  to  comply  with  the  provisions  of 
this  section  or  the  regulations  of  the  Federal  Eeserve  Board  made 
pursuant  thereto,  it  shall  be  within  the  power  of  the  board  after1 
hearing  to  require  such  bank  to  surrender  its  stock  in  the  Fed- 
eral reserve  bank  and  to  forfeit  all  rights  and  privileges  of  mem- 
bership. The  Federal  Eeserve  Board  may  restore  membership 
upon  due  proof  of  compliance  with  the  conditions  imposed  by 
this  section. 

Any  State  bank  or  trust  company  desiring  to  withdraw  from 
membership  in  a  Federal  reserve  bank  may  do  so,  after  six 
months'  written  notice  shall  have  been  filed  with  the  Federal 
Eeserve  Board,  upon  the  surrender  and  cancellation  of  all  of  its 
holdings  of  capital  stock  in  the  Federal  reserve  bank:  Provided, 
however,  That  no  Federal  reserve  bank  shall,  except  under  ex- 
press authority  of  the  Federal  Reserve  Board,  cancel  within  the 
same  calendar  year  more  than  twenty-five  per  centum  of  its  capi- 
tal stock  for  the  purpose  of  effecting  voluntary  withdrawals  dur- 
ing that  year.  All  such  applications  shall  be  dealt  with  in  the 
order  in  which  they  are  filed  with  the  board.  Whenever  a  mem- 
ber bank  shall  surrender  its  stock  holdings  in  a  Federal  reserve 
bank,  or  shall  be  ordered  to  do  so  by  the  Federal  Eeserve  Board, 
under  authority  of  law,  all  of  its  rights  and  privileges  as  a 
member  bank  shall  thereupon  cease  and  determine,  and  after  due 
provision  has  been  made  for  any  indebtedness  due  or  to  become 
due  to  the  Federal  reserve  bank  it  shall  be  entitled  to  a  refund 
of  its  cash  paid  subscription  with  interest  at  the  rate  of  one-half 
of  one  per  centum  per  month  from  date  of  last  dividend,  if 


221 

earned,  the  amount  refunded  in  no  event  to  exceed  the  book  value 
of  the  stock  at  that  time,  and  shall  likewise  be  entitled  to  repay- 
ment of  deposits  and  of  any  other  balance  due  from  the  Federal 
reserve  bank. 

No  applying  bank  shall  be  admitted  to  membership  in  a  Federal 
reserve  bank  unless  it  possesses  a  paid-up,  unimpaired  capital  suffi- 
cient to  entitle  it  to  become  a  national  banking  association  in  the 
place  where  it  is  situated  under  the  provisions  of  the  national 
bank  Act. 

Banks  becoming  members  of  the  Federal  Reserve  System  under 
authority  of  this  section  shall  be  subject  to  the  provisions  of  this 
section  and  to  those  of  this  Act  which  relate  specifically  to  mem- 
ber banks,  but  shall  not  be  subject  to  examination  under  the  pro- 
visions of  the  first  two  paragraphs  of  section  fifty-two  hundred 
and  forty  of  the  Revised  Statutes  as  amended  by  section  twenty- 
one  of  this  Act.*  Subject  to  the  provisions  of  this  Act  and  to 
the  regulations  of  the  board  made  pursuant  thereto,  any  bank 
becoming  a  member  of  the  Federal  Reserve  System  shall  retain 
its  full  charter  and  statutory  rights  as  a  State  bank  or  trust  com- 
pany, and  may  continue  to  exercise  all  corporate  powers  granted 
it  by  the  State  in  which  it  was  created,  and  shall  be  entitled  to 
all  privileges  of  member  banks:  Provided,  however,  That  no  Fed- 
eral reserve  bank  shall  be  permitted  to  discount  for  any  State 
bank  or  trust  company  notes,  drafts,  or  bills  of  exchange  of  any 
one  borrower  who  is  liable  for  borrowed  money  to  such  State 
bank  or  trust  company  in  an  amount  greater  than  ten  per  centum 
of  the  capital  and  surplus  of  such  State  bank  or  trust  company, 
but  the  discount  of  bills  of  exchange  drawn  against  actually  ex- 
isting value  and  the  discount  of  commercial  or  business  paper 
actually  owned  by  the  person  negotiating  the  same  shall  not  be 
considered  as  borrowed  money  within  the  meaning  of  this  sec- 
tion.   The  Federal  reserve  bank,  as  a  condition  of  the  discount  of 

♦This  amends  Sec.  21  of  the  Reserve  Act;  $  131,  page  129,  which 
read  as  follows: 

"The  Comptroller  of  the  Currency,  with  the  approval  of  the  Secre- 
tary of  the  Treasury,  shall  appoint  examiners  who  shall  examine  every 
member  bank  at  least  twice  in  each  calendar  year  and  oftener  if  con- 
sidered necessary;  etc." 


222 

notes,  drafts,  and  bills  of  exchange  for  such  State  bank  or  trust 
company,  shall  require  a  certificate  or  guaranty  to  the  effect  that 
the  borrower  is  not  liable  to  such  bank  in  excess  of  the  amount 
provided  by  this  section,  and  will  not  be  permitted  to  become 
liable  in  excess  of  this  amount  while  such  notes,  drafts,  or  bills 
of  exchange  are  under  discount  with  the  Federal  reserve  bank. 

It  shall  be  unlawful  for  any  officer,  clerk,  or  agent  of  any  bank 
admitted  to  membership  under  authority  of  this  section  to  certify 
any  check  drawn  upon  such  bank  unless  the  person  or  company 
drawing  the  check  has  on  deposit  therewith  at  the  time  such 
check  is  certified  an  amount  of  money  equal  to  the  amount  speci- 
fied in  such  check.  Any  check  so  certified  by  duly  authorized 
officers  shall  be  a  good  and  valid  obligation  against  such  bank, 
but  the  act  of  any  such  officer,  clerk,  or  agent  in  violation  of  this 
section  may  subject  such  bank  to  a  forfeiture  of  its  membership  in 
the  Federal  Eeserve  System  upon  hearing  by  the  Federal  Eeserve 
Board.  (Sec.  9,  Act  Dec.  23,  1913,  as  amended  by  Sec.  3,  Act 
June  21,  1917;  40  Stat.  L.,  232.) 

The  provisions  of  this  section  are  in  no  way  affected  by  Sec.  5200 
of  the  Revised  Statutes  as  amended.    See  §  113,  page  101. 

EEGULATION  H  OF  THE  FEDEEAL  EESERVE  BOAED, 
SEEIES  OF  1917. 

(Superseding  Eegulation  H  of  1916.) 
MEMBERSHIP  OF  STATE  BANKS  AND  TRUST  COMPANIES. 

I.    Statutory  Requirements. 

(The  provisions  of  Section  9  of  the  Federal  Reserve  Act  as  amended 
are  omitted  to  avoid  repetition.) 

II.   Banks  Eligible  for  Membership. 

A  State  bank  or  a  trust  company  to  be  eligible  for  membership  in 
9.  Federal  Reserve  Bank  must  comply  with  the  following  conditions: 

1.  It  must  have  been  incorporated  under  a  special  or  general  law  of 
the  State  or  district  in  which  it  is  located. 

2.  It  must  have  a  minimum  paid-up  unimpaired  capital  stock  as 
follows: 


223 

In  cities  or  towns  not  exceeding  3,000  inhabitants,  $25,000. 

In  cities  or  towns  exceeding  3,000  but  not  exceeding  6,000  inhabi- 
tants, $50,000. 

In  cities  or  towns  exceeding  6,000  but  not  exceeding  50,000  inhabi- 
tants, $100,000. 

In  cities  exceeding  50,000  inhabitants,  $200,000. 

III.   Applications  fob  Membership. 

Any  eligible  State  bank  or  trust  company  may  make  application  on 
F.  R.  B.  Form  83a,  made  a  part  of  this  regulation,  to  the  Federal  Re- 
serve Board  for  an  amount  of  capital  stock  in  the  Federal  Reserve 
Bank  of  its  district  equal  to  6  per  cent,  of  the  paid-up  capital  stock 
and  surplus  of  such  State  bank  or  trust  company.  This  application 
must  be  forwarded  direct  to  the  Federal  Reserve  Agent  of  the  district 
in  which  the  applying  bank  or  trust  company  is  located  and  must 
be  accompanied  by  Exhibits  I,  II  and  III,  referred  to  on  page  1  of  the 
application  blank. 

IV.   Approval  of  Application. 

In  passing  upon  an  application  the  Federal  Reserve  Board  will  con- 
sider especially — 

1.  The  financial  condition  of  the  applying  bank  or  trust  company 
and  the  general  character  of  its  management. 

2.  Whether  the  corporate  powers  exercised  by  the  applying  bank  or 
trust  company  are  consistant  with  the  purposes  of  the  Federal  Reserve 
Act. 

3.  Whether  the  laws  of  the  State  or  district  in  which  the  applying 
bank  or  trust  company  is  located  contain  provisions  likely  to  prevent 
proper  compliance  with  the  provisions  of  the  Federal  Reserve  Act  and 
the  regulations  of  the  Federal  Reserve  Board  made  in  conformity 
therewith. 

If,  in  the  judgment  of  the  Federal  Reserve  Board,  an  applying  bank 
or  trust  company  conforms  to  all  the  requirements  of  the  Federal 
Reserve  Act  and  these  regulations,  and  is  otherwise  qualified  for  mem- 
bership, the  Board  will  issue  a  certificate  of  approval  subject  to  such 
conditions  as  it  may  deem  necessary  to  insure  compliance  with  the 
act  and  these  regulations.  When  the  co'nditions  imposed  by  the  Board 
have  been  accepted  by  the  applying  bank  or  trust  company  the  Board 
will  issue  a  certificate  of  approval,  whereupon  the  applying  bank  or 
trust  company  shall  make  a  payment  to  the  Federal  Reserve  Bank  of 
its  district  of  one-half  of  the  amount  of  its  subscription,  i.  e.,  3  per 
cent,  of  the  amount  of  its  paid-up  capital  and  surplus,  and  upon  re- 
ceipt of  this  payment  the  appropriate  certificate  of  stock  will  be  issued 
by  the  Federal  Reserve  Bank.    The  remaining  half  of  the  subscription 


224 

of  the  applying  bank  or  trust  company  shall  be  subject  to  call  when 
deemed  necessary  by  the  Federal  Reserve  Board. 

V.  Powers  and  Restriction's. 

Every  State  bank  or  trust  company  while  a  member  of  the  Federal 
Reserve  System — 

1.  Shall  retain  its  full  charter  and  statutory  rights  as  a  State  bank 
or  trust  company,  subject  to'  the  provisions  of  the  Federal  Reserve  Act 
and  to  the  regulations  of  the  Federal  Reserve  Board,  including  any 
conditions  embodied  in  the  certificate  of  approval. 

2.  Shall  maintain  such  improvements  and  changes  in  its  banking 
practice  as  may  have  been  specifically  required  of  it  by  the  Federal 
Reserve  Board  as  a  condition  of  its  admissio'n  and  shall  not  lower  the 
standard  of  banking  then  required  of  it;   and 

3.  Shall  enjoy  all  the  privileges  and  observe  all  those  requirements 
of  the  Federal  Reserve  Act  and  of  the  regulations  of  the  Federal  Re- 
serve Board  made  in  conformity  therewith  which  are  applicable  to 
State  banks  and  trust  companies  which  have  become  member  banks. 

VI.    Examinations  and  Reports. 

Every  State  bank  or  trust  company,  while  a  member  of  the  Federal 
Reserve  System,  shall  be  subject  to  examinations  made  by  direction 
of  the  Federal  Reserve  Board  or  of  the  Federal  Reserve  Bank  by  ex- 
aminers selected  or  approved  by  the  Federal  Reserve  Board. 

In  order  to  avoid  duplication,  examinations  of  State  banks  and  trust 
companies  made  by  State  authorities  will  be  accepted  in  lieu  of  ex- 
aminations by  examiners  selected  or  approved  by  the  Board  wherever 
these  are  satisfactory  to  the  directors  of  the  Federal  Reserve  Bank 
and  where,  in  addition,  satisfactory  arrangements  for  cooperation  in 
the  matter  of  examination  between  the  designated  examiners  of  the 
Board  and  those  of  the  States  already  exist  or  can  be  effected  with 
State  authorities.  Examiners  from  the  staff  of  the  Board  or  of  the 
Federal  Reserve  Banks  will,  whenever  desirable,  be  designated  by  the 
Board  to  act  with  the  examination  staff  of  the  State  in  order  that 
uniformity  in  the  standard  of  exmination  may  be  assured. 

Every  State  bank  or  trust  company,  while  a  member  of  the  Federal 
Reserve  System,  shall  be  required  to  make  in  each  year  not  less  than 
three  reports  of  condition  and  of  the  payment  of  dividends.  Such 
reports  shall  be  made  to  the  Federal  Reserve  Bank  of  its  district  on 
call  of  such  bank  on  dates  to  be  fixed  by  the  Federal  Reserve  Board. 

Loans  in  Excess  of  10  per  cent  Limitation. — State  member  banks 
are  not  subject  to  the  limitations  of  section  5200  but  are  subject  only 


225 

to  such  limitatiCns  as  are  imposed  by  State  laws.  Loans  to  one  person 
in  excess  of  10  per  cent  are,  however,  ineligible  for  rediscount  with  a 
Federal  Reserve  Bank.  (Informal  Ruling  of  Board,  Oct.  20,  1917; 
opinion  of  Counsel  of  Board,  July  25,  1917.)  Where  the  excess  is  re- 
discounted  with  a  correspondent  bank  the  remaining  10  per  cent  is 
eligible  for  rediscount.     (Opinion  of  Counsel  of  Board,  June  21,  1918.) 

Transactions  of  Branch  Banks. — Transactions  and  membership  of 
a  branch  bank  should  be  treated  with  those  of  the  parent  bank  as 
one  corporation,  even  though  the  branch  is  located  in  another  district. 
(Informal  Ruling  of  Board,  May  22,  1915;  opinion  of  Counsel  of  Board, 
April  24,  1918.) 

Applications  for  Membership  by  State  Banks  Before  Commencing 
Business. — A  State  bank  may  make  application  for  membership  in 
the  Federal  Reserve  System  as  soon  as  it  has  been  granted  a  charter 
iand  is  authorized  to  commence  business,  but  not  before.  (Opinion  of 
Counsel  of  Board,  Nov.  10,  1917.) 

Eligibility  of  Mutual  Savings  Bank. — A  mutual  savings  bank  with- 
out capital  stock  or  stockholders  is  not  eligible  under  the  law  for 
membership  in  the  Federal  Reserve  System.  (Informal  Ruling  of 
Board,  Oct.  30,  1917.) 

Private  Bankers  as  Members. — The  Federal  Reserve  Act  does  not 
permit  a  private  banker  to  become  a  member  bank,  nor  does  it  permit 
Federal  Reserve  Banks  to'  extend  clearing  privileges  to  such  a  banker. 
(Opinion  of  Counsel  of  Board,  July  30,  1917.) 

Branches  of  Trust  Company  Members. — Trust  companies  having 
branches  are  eligible  for  membership  in  the  Federal  Reserve  System 
and  may  continue  to  maintain  such  branches.  (Informal  Ruling  of 
Board,  June  12,  1915.) 

Opening  of  New  Branches. — It  is  not  the  intent  of  the  Board  to 
deny  an  institution  having  branches  at  the  date  it  becomes  a  member 
of  the  Federal  Reserve  System  the  right  to  add  additional  branches, 
except  for  reasons  similar  to  those  which  might  influence  a  State 
banking  department  in  withholding  its  consent.  (Informal  Ruling  of 
Board,  July  29,  1915.) 

Liabhity  of  Stockholders  of  State  Banks  Wnicn  Have  Become 
Member  Banks. — There  is  no  provision  in  the  Federal  Reserve  Act 
imposing  double  liability  on  the  stockholders  of  State  banks  or  trust 
15 


226 

companies  which  become  members  of  a  Federal  Reserve  Bank.     (Opin- 
ion of  Counsel  of  Board,  June  5,  1915.) 

Ineligibility  of  Building  and  Loan  Associations. — Building  and 
loan  associations  may  not  become  members  of  the  Federal  Reserve 
System.     (Informal  Ruling  of  Board,  July,  1915.) 

Use  of  Word  "Federal." — The  Federal  Reserve  Board  discourages  the 
use  of  the  words  "Federal"  and  "Reserve"  as  part  of  the  title  of 
member  banks  but  approves  the  following  words  on  letterheads  and 
in  advertisements:  "Member  of  the  Federal  Reserve  System."  (In- 
formal Ruling  of  Board,  July  21,  1917,  and  May  18,  1918.) 

§  218.  Creation  of  Federal  Reserve  Board — Salaries  of  Mem- 
bers.— A  Federal  Eeserve  Board  is  hereby  created  which  shall  con- 
sist of  6even  members,  including  the  Secretary  of  the  Treasury 
and  the  Comptroller  of  the  Currency,  who  shall  be  members  ex 
officio,  and  five  members  appointed  by  the  President  of  the  United 
States,  by  and  with  the  advice  and  consent  of  the  Senate.  In  se- 
lecting the  five  appointive  members  of  the  Federal  Eeserve  Board, 
not  more  than  one  of  whom  shall  be  selected  from  any  one  Federal 
reserve  district,  the  President  shall  have  due  regard  to  a  fair  rep- 
resentation of  the  different  commercial,  industrial  and  geograph- 
ical divisions  of  the  country.  The  five  members  of  the  Federal 
Eeserve  Board  appointed  by  the  President  and  confirmed  as  afore- 
said shall  devote  their  entire  time  to  the  business  of  the  Federal 
Eeserve  Board  and  shall  each  receive  an  annual  salary  of  $12,000, 
payable  monthly  together  with  actual  necessary  traveling  expenses, 
and  the  Comptroller  of  the  Currency,  as  ex  officio  member  of  the 
Federal  Eeserve  Board,  shall,  in  addition  to  the  salary  now  paid 
him  as  Comptroller  of  the  Currency,  receive  the  sum  of  $7,000 
annually  for  his  services  as  a  member  of  said  Board.  (Sec.  10, 
Act  Dec.  23,  1913.) 

§  219.  Organization  of  Board.— The  Secretary  of  the  Treasury 
and  the  Comptroller  of  the  Currency  shall  be  ineligible  during 
the  time  they  are  in  office  and  for  two  years  thereafter  to  hold 
any  office,  position,  or  employment  in  any  member  bank.  The  ap- 
pointive members  of  the  Federal  Eeserve  Board  shall  be  ineligible 


227 

during  the  time  they  are  in  office  and  for  two  years  thereafter  to 
hold  any  office,  position,  or  employment  in  any  member  bank,  ex- 
cept that  this  restriction  shall  not  apply  to  a  member  who  has 
served  the  full  term  for  which  he  was  appointed.  Of  the  five  mem- 
bers thus  appointed  by  the  President  at  least  two  shall  be  persons 
experienced  in  banking  or  finance.  One  shall  be  designated  by 
the  President  to  serve  for  two,  one  for  four,  one  for  six,  one  for 
eight,  and  one  for  ten  years,  and  thereafter  each  member  so  ap- 
pointed shall  serve  for  a  term  of  ten  years  unless  sooner  removed 
for  cause  by  the  President.  Of  the  five  persons  thus  appointed, 
one  shall  be  designated  by  the  President  as  governor  and  one  as 
vice  governor  of  the  Federal  Eeserve  Board.  The  governor  of  the 
Federal  Eeserve  Board,  subject  to  its  supervision,  shall  be  the  active 
executive  officer.  The  Secretary  of  the  Treasury  may  assign  offices 
in  the  Department  of  the  Treasury  for  the  use  of  the  Federal  Ee- 
serve Board.  Each  member  of  the  Federal  Eeserve  Board  shall 
within  fifteen  days  after  notice  of  appointment  make  and  sub- 
scribe to  the  oath  of  office.  (Sec.  10,  Act  Dec.  23,  1913,  as  amended 
by  Sec.  2,  Act  March  3,  1919;  40  Stat.  L.,  1315.) 

§  220.  Assessment  to  Meet  Expenses  of  Board.—  The  Federal 
Eeserve  Board  shall  have  power  to  levy  semi-annually  upon  the 
Federal  reserve  banks,  in  proportion  to  their  capital  stock  and 
surplus,  an  assessment  sufficient  to  pay  its  estimated  expenses  and 
the  salaries  of  its  members  and  employees  for  the  half  year  suc- 
ceeding the  levying  of  such  assessment,  together  with  any  deficit 
carried  forward  from  the  preceding  half  year.  (Sec.  10,  Act  Dec. 
23,  1913.) 

Separation  of  Federal  Reserve  Note  Account. — The  cost  of  Federal 
Reserve  notes  should  be  charged  to  the  Federal  Reserve  Banks  as  a 
separate  account  and  paid  as  bills  are  rendered  by  the  Treasury  De- 
partment. This  note  account  should  not  be  included  in  the  semiannual 
assessment  against  Federal  Reserve  Banks.  (Informal  Ruling  of 
Board,  March  24,  1915.) 

§  221.  Qualifications  of  Members  of  Board — Filling  Vacancies. 
— The  first  meeting  of  the  Federal  Eeserve  Board  shall  be  held  in 


228 

Washington,  District  of  Columbia,  as  soon  as  may  be  after  tbe 
passage  of  this  Act,  at  a  date  to  be  fixed  by  the  Eeserve  Bank  Or- 
ganization committee.  The  Secretary  of  the  Treasury  shall  be  ex 
officio  chairman  of  the  Federal  Eeserve  Board.  No  member  of 
the  Federal  Eeserve  Board  shall  be  an  officer  or  director  of  any 
bank,  banking  institution,  trust  company,  or  Federal  reserve  bank 
nor  hold  stock  in  any  bank,  banking  institution,  or  trust  company ; 
and  before  entering  upon  his  duties  as  a  member  of  the  Federal 
Eeserve  Board  he  shall  certify  under  oath  to  the  Secretary  of  the 
Treasury  that  he  has  complied  with  this  requirement.  Whenever 
a  vacancy  shall  occur,  other  than  by  expiration  of  term,  among 
the  five  members  of  the  Federal  Eeserve  Board  appointed  by  the 
President,  as  above  provided,  a  successor  shall  be  appointed  by  the 
President,  with  the  advice  and  consent  of  the  Senate,  to  fill  such 
vacancy,  and  when  appointed  he  shall  hold  office  for  the  unex- 
pired term  of  the  member  whose  place  he  is  selected  to  fill. 

The  President  shall  have  power  to  fill  all  vacancies  that  may 
happen  on  the  Federal  Eeserve  Board  during  the  recess  of  the 
Senate,  by  granting  commissions  which  shall  expire  thirty  days 
after  the  next  session  of  the  Senate  convenes.  (Sec.  10,  Act  Dec. 
23,  1913.) 

§  222.  Supervision   of   Secretary   of   Treasury   Over  Board. — 

Nothing  in  this  Act  contained  shall  be  construed  as  taking  away 
any  powers  heretofore  vested  by  law  in  the  Secretary  of  the  Treas- 
ury which  relate  to  the  supervision,  management,  and  control  of 
the  Treasury  Department  and  bureaus  under  such  department,  and 
wherever  any  power  vested  by  this  Act  in  the  Federal  Eeserve 
Board  or  the  Federal  reserve  agent  appears  to  conflict  with  the 
powers  of  the  Secretary  of  the  Treasury,  such  powers  shall  be  ex- 
ercised subject  to  the  supervision  and  control  of  the  Secretary. 
(Sec.  10,  Act  Dec.  23,  1913.) 

§  223.  Annual  Report  of  Board  to  Congress. — The  Federal  Ee- 
serve Board  shall  annually  make  a  full  report  of  its  operations  to 
the  Speaker  of  the  House  of  Eepresentatives,  who  shall  cause  the 
same  to  be  printed  for  the  information  of  the  Congress.  (Sec.  10, 
Act  Dec.  23,  1913.) 


229 

§  224.  Bureau  for  Issue  and  Regulation  of  National  Bank 
Notes   and  Federal  Reserve   Notes. — See  §  2,  page  1,  Part  I. 

§  225.  Visitorial  Powers  of  Board — Publication  of  Weekly 
Statements.— The  Federal  Eeserve  Board  shall  be  authorized  and 
empowered : 

(a)  To  examine  at  its  discretion  the  accounts,  books  and  affairs 
of  each  Federal  reserve  bank  and  of  each  member  bank  and  to  re- 
quire such  statements  and  reports  as  it  may  deem  necessary.  The 
said  board  shall  publish  once  each  week  a  statement  showing  the 
condition  of  each  Federal  reserve  bank  and  a  consolidated  statement 
for  all  Federal  reserve  banks.  Such  statements  shall  show  in  de- 
tail the  assets  and  liabilities  of  the  Federal  reserve  banks,  single 
and  combined,  and  shall  furnish  full  information  regarding  the 
character  of  the  money  held  as  reserve  and  the  amount,  nature 
and  maturities  of  the  paper  and  other  investments  owned  or  held 
by  Federal  reserve  banks.     (Sec.  11,  Act  Dec.  23,  1913.) 

§  226.  Power  of  Board — Rediscount  by  Reserve  Bank  of  Dis- 
counted Paper  of  Other  Reserve  Banks. —  (b)  To  permit,  or,  on 
the  affirmative  vote  of  at  least  five  members  of  the  Reserve  Board 
to  require  Federal  reserve  banks  to  rediscount  the  discounted  paper 
of  other  Federal  reserve  banks  at  rates  of  interest  to  be  fixed  by 
the  Federal  Eeserve  Board.     (Sec.  11,  Act  Dec.  23,  1913.) 

§  227.  Power  of  Board  to  Suspend  Reserve  Requirements — Tax 
on  Deficiency. —  (c)  To  suspend  for  a  period  not  exceeding  thirty 
days,  and  from  time  to  time  to  renew  such  suspension  for  periods 
not  exceeding  fifteen  days,  any  reserve  requirement  specified  in 
this  Act:  Provided,  That  it  shall  establish  a  graduated  tax  upon 
the  amounts  by  which  the  reserve  requirements  of  this  Act  may 
be  permitted  to  fall  below  the  level  hereinafter  specified:  And 
provided  further,  That  when  the  gold  reserve  held  against  Fed- 
eral reserve  notes  falls  below  forty  per  centum,  the  Federal  Ee- 
serve Board  shall  establish  a  graduated  tax  of  not  more  than  one 
per  centum  per  annum  upon  such  deficiency  until  the  reserves  fall 
to  thirty-two  and  one-half  per  centum,  and  when  said  reserve  falls 


230 

below  thirty-two  and  one-half  per  centum,  a  tax  at  the  rate  in- 
creasingly of  not  less  than  one  and  one-half  per  centum  per  an- 
num upon  each  two  and  one-half  per  centum  or  fraction  thereof 
that  such  reserve  falls  below  thirty-two  and  one-half  per  centum. 
The  tax  shall  be  paid  by  the  reserve  bank,  but  the  reserve  bank 
shall  add  an  amount  equal  to  said  tax  to  the  rates  of  interest  and 
discount  fixed  by  the  Federal  Reserve  Board.  (Sec.  11,  Act  Dec. 
23,  1913.) 

§  228.  Power  of  Board — Issue,  Delivery  and  Retirement  of 
Federal  Reserve  Notes.-  (d)  To  supervise  and  regulate  through 
the  bureau  under  the  charge  of  the  Comptroller  of  the  Currency 
the  issue  and  retirement  of  Federal  reserve  notes,  and  to  prescribe 
rules  and  regulations  under  which  such  notes  may  be  delivered  by 
the  Comptroller  to  the  Federal  reserve  agents  applying  therefor. 
(Sec.  11,  Act  Dec.  23,  1913.) 

§  229.  Power  of  Board — Reserve  and  Central  Reserve  Cities. — 
(e)  To  add  to  the  number  of  cities  classified  as  reserve  and  central 
reserve  cities  under  existing  law  in  which  National  banking  asso- 
ciations are  subject  to  the  reserve  requirements  set  forth  in  section 
twenty  *  of  this  Act;  or  to  reclassify  existing  reserve  and  central 
reserve  cities  or  to  terminate  their  designation  as  such.  (Sec.  11, 
Act  Dec.  23,  1913.) 

Requirements  fob  Reserve  Cities. — The  requirements  to  be  observed 
before  any  city  is  designated  by  the  Board  as  a  reserve  city  are:  Pop- 
ulation, 50,000;  capital  and  surplus  of  Natio'nal  banks,  $3,000,000; 
deposits,  not  less  than  $10,000,000;  and  the  indorsement  of  the  applica- 
tion by  at  least  50  National  banks  located  outside  the  applying  city. 
(Statement  of  Board,  March  22,  1915.) 

Central  Reserve  Cities — List  of. — There  are  only  three  central 
reserve  cities,  namely:  New  York,  Chicago  and  St.  Louis. 

Reserve  Cities — List  of. — The  following  were  the  reserve  cities  on 
the  date  of  this  publication:     Boston,  Albany,  Brooklyn  and  Bronx, 

*  This  reference  to  Section  20  is  an  error  in  the  Act.  The  reference 
should  be  to  Section  19. 


231 

Buffalo,  Philadelphia,  Pittsburgh,  Baltimore,  Washington,  Richmond, 
Charleston,  Atlanta,  Jacksonville,  Birmingham,  New  Orleans,  Dallas, 
El  Paso,  Fort  Worth,  Galveston,  Houston,  San  Antonio,  Waco,  Little 
Rock,  Louisville,  Chattanooga,  Memphis,  Nashville,  Cincinnati,  Cleve- 
land, Columbus,  Toledo,  Indianapolis,  Peoria,  Detroit,  Grand  Rapids, 
Milwaukee,  Minneapolis,  St.  Paul,  Cedar  Rapids,  Des  Moines,  Dubuque, 
Sioux  City,  Kansas  City,  Mo.,  St.  Joseph,  Lincoln,  Omaha,  Kansas  City, 
Kans.,  Topeka,  Wichita,  Denver,  Pueblo,  Muskogee,  Oklahoma  City, 
Tulsa,  Seattle,  Spokane,  Tacoma,  Portland,  Ore.,  Los  Angeles,  Oakland, 
San  Francisco,  Ogden,  Salt  Lake  City. 

§  230.  Power  of  Board — Suspension  or  Removal  of  Officer  or 
Director  of  Reserve  Bank. — -(f)  To  suspend  or  remove  any  officer 
or  director  of  any  Federal  reserve  bank,  the  cause  of  such  removal 
to  be  forthwith  communicated  in  writing  by  the  Federal  Reserve 
Board  to  the  removed  officer  or  director  and  to  said  bank.  (Sec. 
11,  Act  Dec.  23,  1913.) 

§  231.  Power  of  Board— Writing  Off  of  Doubtful  or  Worthless 
Assets  by  Reserve  Banks.—  (g)  To  require  the  writing  off  of  doubt- 
ful or  worthless  assets  upon  the  books  and  balance  sheets  of  Fed- 
eral reserve  banks.    (Sec.  11,  Act  Dec.  23,  1913.) 

§  232.  Power  of  Board — Suspension,  Liquidation  or  Reorgan- 
ization of  Reserve  Bank. —  (h)  To  suspend,  for  the  violation  of 
any  of  the  provisions  of  this  Act,  the  operations  of  any  Federal 
reserve  bank,  to  take  possession  thereof,  administer  the  same  during 
the  period  of  suspension,  and,  when  deemed  advisable,  to  liquidate 
or  reorganize  such  bank.     (Sec.  11,  Act  Dec.  23,  1913.) 

§  233.  Power  of  Board — Bonding  of  Federal  Reserve  Agents — - 
Performance  of  Duties,  Functions  and  Services  of  Act. —  (i)  To 
require  bonds  of  Federal  reserve  agents,  to  make  regulations  for 
the  safeguarding  of  all  collateral,  bonds,  Federal  reserve  notes, 
money  or  property  of  any  kind  deposited  in  the  hands  of  such 
agents,  and  said  board  shall  perform  the  duties,  functions,  or  ser- 
vices specified  in  this  Act,  and  make  all  rules  and  regulations 
necessary  to  enable  said  board  effectively  to  perform  the  same. 
(Sec.  11,  Act  Dec.  23,  1913.) 


233 

§234.  Power  of  Board — General  Supervision  Over  Reserve 
Banks. —  (j)  To  exercise  general  supervision  over  said  Federal  Ee- 
serve  Banks.     (Sec.  11,  Act  Dec.  23,  1913.) 

§235.  Power  of  Board — Grant  of  Trustee  Powers  to  National 
Banks. —  (k)  To  grant  by  special  permit  to  National  banks  ap- 
plying therefor,  when  not  in  contravention  of  State  or  local  law, 
the  right  to  act  as  trustee,  executor,  administrator,  registrar  of 
stocks  and  bonds,  guardian  of  estates,  assistant  receiver,  com- 
mittee of  estates  of  lunatics,  or  in  any  other  fiduciary  capacity 
in  which  State  banks,  trust  companies,  or  other  corporations 
which  come  into  competition  with  National  banks  are  permitted 
to  act  under  the  laws  of  the  State  in  which  the  National  bank  is 
located. 

Whenever  the  laws  of  such  State  authorize  or  permit  the  exer- 
cise of  any  or  all  of  the  foregoing  powers  by  State  hanks,  trust 
companies,  or  other  corporations  which  compete  with  National 
banks,  the  granting  to  and  the  exercise  of  such  powers  by  Na- 
tional banks  shall  not  be  deemed  to  be  in  contravention  of  State 
or  local  law  within  the  meaning  of  this  Act. 

National  banks  exercising  any  or  all  of  the  powers  enumerated 
in  this  subsection  shall  segregate  all  assets  held  in  any  fiduciary 
capacity  from  the  general  assets  of  the  bank  and  shall  keep  a 
separate  set  of  books  and  records  showing  in  proper  detail  all 
transactions  engaged  in  under  authority  of  this  subsection. 
Such  books  and  records  shall  be  open  to  inspection  by  the  State 
authorities  to  the  same  extent  as  the  books  and  records  of  cor- 
porations organized  under  State  law  which  exercise  fiduciary  pow- 
ers, but  nothing  in  this  Act  shall  be  construed  as  authorizing  the 
State  authorities  to  examine  the  books,  records,  and  assets  of  the 
National  bank  which  are  not  held  in  trust  under  authority  of  this 
subsection. 

No  National  bank  shall  receive  in  its  trust  department  deposits 
of  current  funds  subject  to  check  or  the  deposit  of  checks,  drafts, 
bills  of  exchange,  or  other  items  for  collection  or  exchange  pur- 
poses. Funds  deposited  or  held  in  trust  by  the  bank  awaiting 
investment  shall  be  carried  in  a  separate  account  and  shall  not 


233 

be  used  by  the  bank  in  the  conduct  of  its  business  unless  it  shall 
first  set  aside  in  the  trust  department  United  States  bonds  or  other 
securities  approved  by  the  Federal  Eeserve  Board. 

In  the  event  of  the  failure  of  such  bank  the  owners  of  the  funds 
held  in  trust  for  investment  shall  have  a  lien  on  the  bonds  on 
other  securities  so  set  apart  in  addition  to  their  claim  against  the 
estate  of  the  bank. 

Whenever  the  laws  of  a  State  require  corporations  acting  in 
a  fiduciary  capacity,  to  deposit  securities  with  the  State  authori- 
ties for  the  protection  of  private  or  court  trusts,  National  banks 
so  acting  shall  be  required  to  make  similar  deposits  and  securities 
so  deposited  shall  be  held  for  the  protection  of  private  or  court 
trusts,  as  provided  by  the  State  law. 

National  banks  in  such  cases  shall  not  be  required  to  execute 
the  bond  usually  required  of  individuals  if  State  corporations  un- 
der similar  circumstances  are  exempt  from  this  requirement. 

National  banks  shall  have  power  to  execute  such  bond  when 
so  required  by  the  laws  of  the  State. 

In  any  case  in  which  the  laws  of  a  State  require  that  a  corpora- 
iton  acting  as  trustee,  executor,  administrator,  or  in  any  capacity 
specified  in  this  section,  shall  take  an  oath  or  make  an  affidavit, 
the  president,  vice  president,  cashier,  or  trust  officer  of  such  Na- 
tional bank  may  take  the  necessary  oath  or  execute  the  necessary 
affidavit. 

It  shall  be  unlawful  for  any  National  banking  association  to 
lend  any  officer,  director,  or  employee  any  funds  held  in  trust 
under  the  powers  conferred  by  this  section.  Any  officer,  director, 
or  employee  making  such  loan,  or  to  whom  such  loan  is  made, 
may  be  fined  not  more  than  $5,000,  or  imprisoned  not  more  than 
five  years,  or  may  be  both  fined  and  imprisoned,  in  the  discretion 
of  the  court. 

In  passing  upon  application  for  permission  to  exercise  the  pow- 
ers enumerated  in  this  subsection,  the  Federal  Eeserve  Board 
may  take  into  consideration  tho  amount  of  capital  and  surplus 
of  the  applying  bank,  whether  or  not  such  capital  and  surplus 
is  sufficient  under  the  circumstances  of  the  case,  the  needs  of 
the  community  to  be  served,  and  any  other  facts  and  circumstances 


234 

that  seem  to  it  proper,  and  may  grant  or  refuse  the  application 
accordingly :  Provided,  That  no  permit  shall  be  issued  to  any  Na- 
tional banking  association  having  a  capital  and  surplus  less  than 
the  capital  and  surplus  required  by  State  law  of  State  banks,  trust 
companies,  and  corporations  exercising  such  powers.  (Sec.  11, 
Act  Dec.  23,  1913,  as  amended  by  Sec.  2,  Act  Sept.  26,  1918; 
40  Stat.  L.,  968.) 

The  Supreme  Court  of  Illinois,  in  the  case  of  People  v.  Brady,  (271 
111.,  100),  and  the  Supreme  Court  of  Michigan  in  the  case  of  Fellows 
v.  First  Nat.  Bank  (Mich.  159  N.  E.,  335),  held  that  section  11  (k) 
-was  unconstitutional  and  void.  The  latter  case,  however,  was  taken 
to  the  Supreme  Court  of  the  United  States  and  reversed,  the  court 
holding  that  the  section  was  constitutional  and  valid.  (First  Nat. 
Bank  v.  Fellows,  244  U.  S.,  416.) 

On  March  27,  1920,  Judge  Van  Valkenburgh  of  the  U.  S.  District 
Court  at  Kansas  City,  Mo.,  held  that  a  National  bank,  duly  authorized 
to  exercise  trust  powers,  could,  with  the  Comptroller's  approval,  use 
the  words  "trust  company"  as  part  of  its  corporate  title  even  though 
the  state  law  prohibited  such  use, 

REGULATION  F  OF  THE  FEDERAL  RESERVE  BOARD, 
SERIES  OF  1919. 

(Superseding  Regulation  F  of  1917.) 

I.   Statutory  Provisions. 
See  $235  above. 

II.   Applications. 

A  National  bank  desiring  to  exercise  any  or  all  of  the  powers  au- 
thorized by  section  11  (k)  of  the  Federal  Reserve  Act,  as  amended  by 
the  Act  of  September  26,  1918,  shall  make  application  to  the  Federal 
Reserve  Board,  on  a  form  approved  by  said  Board,  for  a  special  permit 
authorizing  it  to  exercise  such  powers.  In  the  case  of  an  original 
application — that  is,  where  the  applying  bank  has  never  been  granted 
the  right  to  exercise  any  of  the  powers  authorized  by  section  11  (k), 
the  application  should  be  made  On  Form  61.  In  the  case  of  a  supple- 
mental application — that  is,  where  the  applying  bank  has  already  been 
granted  the  right  to  exercise  one  or  more  of  the  powers  authorized 
by  section  11  (k),  the  application  should  be  made  on  Form  61b.  Both 
forms  are  made  a  part  of  this  regulation  and  may  be  obtained  from 
the  Federal  Reserve  Board  or  any  Federal  Reserve  Bank. 


235 

III.    Separate  Departments. 

Every  National  bank  permitted  to  act  under  this  section  shall  es- 
tablish a  separate  trust  department,  and  shall  place  such  department 
under  the  management  of  an  officer  or  officers,  whose  duties  shall  be 
prescribed  by  the  board  of  directors  of  the  bank. 

IV.  Custody  of  Trust  Securities  and  Investments. 

The  securities  and  investments  held  in  each  trust  shall  be  kept 
separate  and  distinct  from  the  securities  owned  by  the  bank  and 
separate  and  distinct  one  from  another.  Trust  securities  and  invest- 
ments shall  be  placed  in  the  joint  custody  of  two  or  more  officers  or 
other  employees  designated  by  the  board  of  directors  of  the  bank  and 
all  such  officers  and  employees  shall  be  bo'nded. 

V.   Deposit  of  Funds  Awaiting  Investment  or  Distribution. 

Funds  received  or  held  in  the  trust  department  of  a  National  bank 
awaiting  investment  or  distribution  may  be  deposited  in  the  com- 
mercial department  of  the  bank  to  the  credit  of  the  trust  department, 
provided  that  the  bank  first  delivers  to  the  trust  department,  as  col- 
lateral security,  United  States  bonds,  o'r  other  readily  marketable 
securities  owned  by  the  bank,  equal  in  market  value  to  the  amount  of 
the  funds  so  deposited. 

VI.    Investment  of  Trust  Funds. 

(c)  Private  trusts. — Funds  held  in  trust  must  be  invested  in  strict 
accordance  with  the  terms  of  the  will,  deed,  or  other  instrument 
creating  the  trust.  Where  the  instrument  creating  the  trust  contains 
provisions  authorizing  the  bank,  its  officers,  or  its  directors  to  exercise 
their  discretion  in  the  matter  of  investments,  funds  held  in  trust 
may  be  invested  only  in  those  classes  of  securities  which  are  approved 
by  the  directors  of  the  bank.  Where  the  instrument  creating  the  trust 
does  not  specify  the  character  or  class  of  investments  to'  be  made  and 
does  not  expressly  vest  in  the  bank,  its  officers,  or  its  directors  a 
discretion  in  the  matter  of  investments,  funds  held  in  trust  shall  be 
invested  in  any  securities  in  which  corporate  or  individual  fiduciaries 
in  the  State  in  which  the  bank  is  located  may  lawfully  invest. 

(b)  Court  trusts. — Except  as  hereinafter  provided,  a  National  bank 
acting  as  executor,  administrator,  or  in  any  other  fiduciary  capacity, 
under  appointment  by  a  court  of  competent  jurisdiction,  shall  make 
all  investments  under  an  order  of  that  court,  and  copies  of  all  such 
orders  shall  be  filed  and  preserved  with  the  records  of  the  trust  depart- 
ment of  the  bank.    If  the  court  by  general  order  vests  a  discretion  in 


236 

the  National  bank  to  invest  funds  held  in  trust,  or,  if  under  the  laws 
of  the  State  in  which  the  bank  is  located  corporate  fiduciaries  ap- 
pointed by  the  court  are  permitted  to  exercise  such  discretion,  the 
National  bank  so  appointed  may  invest  such  funds  in  any  securities 
in  which  corporate  or  individual  fiduciaries  in  the  State  in  which  the 
bank  is  located  may  lawfully  invest. 

VII.    Books  and  Accounts. 

All  books  and  records  of  the  trust  department  shall  be  kept  separate 
and  distinct  from  other  books  and  records  of  the  bank.  All  accounts 
opened  shall  be  so  kept  as  to  enable  the  National  bank  at  any  time 
to  furnish  information  or  reports  required  by  the  Federal  or  State 
authorities,  and  such  books  and  records  shall  be  opened  to  the  in- 
spection of  such  authorities. 

VIII,   Examinations. 

Examiners  appointed  by  the  Comptroller  of  the  Currency  or  desig- 
nated by  the  Federal  Reserve  Board  will  be  instructed  to  make 
thorough  and  complete  audits  of  the  cash,  securities,  accounts,  and 
investments  of  the  trust  department  of  the  bank  at  the  same  time 
that  examination  is  made  of  the  banking  department. 

IX.   Conformity  with:  State  Laws. 

Nothing  in  these  regulations  shall  be  construed  to  give  a  National 
bank  exercising  the  powers  permitted  under  the  provisions  of  section 
11  (k)  of  the  Federal  Reserve  Act,  as  amended,  any  rights  or  privileges 
in  contravention  of  the  laws  of  the  State  in  which  the  bank  is  located 
within  the  meaning  of  that  Act. 

X.    Revocation  of  Permits. 

The  Federal  Reserve  Board  reserves  the  right  to  revoke  permits 
granted  under  the  provisions  of  section  11  (k),  as  amended,  in  any 
case  where  in  the  opinion  of  a  Board  a  bank  has  wilfully  violated 
the  provisions  of  the  Federal  Reserve  Act  or  of  these  regulations  or 
the  laws  of  any  State  relating  to  the  operations  of  such  bank  when 
acting  in  any  of  the  capacities  permitted  under  the  provisions  of 
section  11  (k),  as  amended. 

XI.  Changes  in  Regulations. 

These  regulations  are  subject  to  change  by  the  Federal  Reserve 
Board;    provided,  however,  that  no   such   change   shall   prejudice   any 


237 

obligation  undertaken  in  good  faith  under  regulations  in  effect  at  the 
time  the  obligation  was  assumed. 

(Note. — The  above  regulation  F  took  effect  April  15,  1919.) 

Board's  Powee  to  Grant. — The  board  in  the  last  analysis  must  de- 
termine whether  it  will  or  will  not  grant  fiduciary  powers  and  whether 
State  law  permits  them  to  be  exercised.  (Informal  Ruling  of  Board, 
June  4,  1915.) 

Under  the  provisions  of  section  11  (k),  as  amended  by  the  Act  of 
September  26,  1918,  the  Federal  Reserve  Board  may  properly  permit 
any  National  bank  to  exercise  any  of  the  fiduciary  powers  authorized 
by  that  section,  unless  there  is  some  express  provision  of  the  laws  of 
the  State  in  which  such  bank  is  located  which  either  directly  or  by 
necessary  implication  prohibits  National  banks  from  exercising  such 
powers  and  even  if  there  is  such  an  express  statute,  the  Board  may 
issue  its  permit  if  any  State  bank,  trust  company,  or  other  competing 
corporation  in  that  State  is  permitted  to  exercise  the  powers  applied 
for  by  the  National  bank.  (Opinion  of  Counsel  of  Board,  March  31, 
1919.) 

§  236.  Power  of  Board — Employment  of  Assistants,  Clerks,  etc. 
— (i)  To  employ  such,  attorneys,  experts,  assistants,  clerks,  or 
other  employees  as  may  be  deemed  necessary  to  conduct  the  busi- 
ness of  the  board.  All  salaries  and  fees  shall  be  fixed  in  advance 
by  said  board  and  shall  be  paid  in  the  same  manner  as  the  salaries 
of  the  members  of  said  board.  All  such  attorneys,  experts,  assis- 
tants, clerks,  and  other  employees  shall  be  appointed  without  re- 
gard to  the  provisions  of  the  Act  of  January  sixteenth,  eighteen 
hundred  and  eighty-three  (volume  twenty-two,  United  States 
Statutes  at  Large,  page  four  hundred  and  three),  and  amendments 
thereto,  or  any  rule  or  regulation  made  in  pursuance  thereof: 
Provided,  That  nothing  herein  shall  prevent  the  President  from 
placing  said  employees  in  the  classified  service.  (Sec.  11,  Act 
Dec.  23,  1913.) 

§  237.  Power  of  Board — Permission  to  Discount  Paper  in  Ex- 
cess of  Limitation  When  Secured  by  War-Time  Securities. — 
(m)  Upon  the  affirmative  vote  of  not  less  than  five  of  its  mem- 


233 

bers,  the  Federal  Reserve  Board  sliall  have  power  to  permit  Fed- 
eral reserve  banks  to  discount  for  any  member  bank  notes,  drafts, 
or  bills  of  exchange  bearing  the  signature  or  endorsement  of  any- 
one borrower  in  excess  of  the  amount  permitted  by  section  nine 
and  section  thirteen  of  this  Act,  but  in  no  case  to  exceed  twenty 
per  centum  of  the  member  bank's  capital  and  surplus:  Provided, 
however,  That  all  such  notes,  drafts,  or  bills  of  exchange  dis- 
counted for  any  member  bank  in  excess  of  the  amount  permitted 
under  such  sections  shall  be  secured  by  not  less  than  a  like  face 
amount  of  bonds  or  notes  of  the  United  States  issued  since  April 
twenty-fourth,  nineteen  hundred  and  seventeen,  or  certificates  of 
indebtedness  of  the  United  States:  Provided  further,  That  the 
provisions  of  this  subsection  (m)  shall  not  be  operative  after  De- 
cember thirty-first,  nineteen  hundred  and  twenty.  (Sec.  11,  Act 
Dec.  23,  1913,  as  amended  by  Act  Sept.  7,  1916,  and  further  by 
Sec.  3,  Act  March  3,  1919 ;  40  Stat.  L.,  1315.) 

§  238.  Federal  Advisory  Council. — There  is  hereby  created  a 
Federal  Advisory  Council,  which  shall  consist  of  as  many  members 
as  there  are  Federal  reserve  districts.  Each  Federal  reserve  bank 
by  its  board  of  directors  shall  annually  select  from  its  own  Federal 
reserve  district  one  member  of  said  council,  who  shall  receive  such 
compensation  and  allowances  as  may  be  fixed  by  his  board  of 
directors  subject  to  the  approval  of  the  Federal  Reserve  Board. 
The  meetings  of  said  advisory  council  shall  be  held  at  Washington, 
District  of  Columbia,  at  least  four  times  each  }rear,  and  oftener  if 
called  by  the  Federal  Reserve  Board.  The  council  may  in  addition 
to  the  meetings  above  provided  for  hold  such  other  meetings  in 
Washington,  District  of  Columbia,  or  elsewhere,  as  it  may  deem 
necessary,  may  select  its  own  officers  and  adopt  its  own  methods 
of  procedure,  and  a  majority  of  its  members  shall  constitute  a 
quorum  for  the  transaction  of  business.  Vacancies  in  the  council 
shall  be  filled  by  the  respective  reserve  banks,  and  members  selected 
to  fill  vacancies,  shall  serve  for  the  unexpired  term. 

The  Federal  Advisory  Council  shall  have  power,  by  itself  or 
through  its  officers,  (1)  to  confer  directly  with  the  Federal  Re- 
serve Board  on  general  business  conditions;  (2)  to  make  oral  or 


239 

written  representations  concerning  matters  within  the  jurisdiction 
of  said  board;  (3)  to  call  for  information  and  to  make  recom- 
mendations in  regard  to  discount  rates,  rediscount  business,  note 
issues,  reserve  conditions  in  the  various  districts,  the  purchase  and 
sale  of  gold  or  securities  by  reserve  banks,  open-market  operations 
by  said  banks,  and  the  general  affairs  of  the  reserve  banking  sys- 
tem.    (Sec.  12,  Act  Dec.  23,  1913.) 

Time  of  Election. — Elections  of  members  of  the  advisory  council 
should  be  made  at  the  first  meeting  after  the  1st  of  January  each  year 
which  is  attended  by  the  new  directors  of  Federal  Reserve  Banks.  (In- 
formal Ruling  of  Board,  Dec.  16,  1915.) 

Attendance  at  Directors'  Meetings. — Members  of  the  advisory  coun- 
cil should  sit  with  boards  of  directors  of  the  Federal  Reserve  Banks 
only  by  invitation,  and  not  as  a  matter  of  course.  (Informal  Ruling 
of  Board,  Feb.  16,  1916.) 

§  239.  Powers  of  Beserve  Banks — As  Depository  and  Collect- 
ing Agent — Collection  Charges.—  Any  Federal  reserve  bank  may  re- 
ceive from  any  of  its  member  banks,  and  from  the  United  States, 
deposits  of  current  funds  in  lawful  money,  National  bank  notes, 
Federal  reserve  notes,  or  checks,  and  drafts,  payable  upon  presen- 
tation, and  also,  for  collection,  maturing  notes  and  bills ;  or,  solely 
for  purposes  of  exchange  or  of  collection,  may  receive  from  other 
Federal  reserve  banks  deposits  of  current  funds  in  lawful  money, 
National  bank  notes,  or  checks  upon  other  Federal  reserve  banks, 
and  checks  and  drafts,  payable  upon  presentation  within  its  dis- 
trict, and  maturing  notes  and  bills  payable  within  its  district; 
or,  solely  for  the  purposes  of  exchange  or  of  collection,  may  re- 
ceive from  any  nonmember  bank  or  trust  company  deposits  of 
current  funds  in  lawful  money,  National  bank  notes,  Federal  re- 
serve notes,  checks  and  drafts  payable  upon  presentation,  or  matur- 
ing notes  and  bills:  Provided,  Such  nonmember  bank  or  trust 
company  maintains  with  the  Federal  reserve  bank  of  its  district 
a  balance  sufficient  to  offset  the  items  in  transit  held  for  its  ac- 
count by  the  Federal  reserve  bank :  Provided  further,  That  noth- 
ing in  this  or  any  other  section  of  this  Act  shall  be  construed  as 
prohibiting  a  member  or  nonmember  bank  from  making  reason- 


240 

able  charges,  to  be  determined  and  regulated  by  the  Federal  Re- 
serve Board,  but  in  no  case  to  exceed  10  cents  per  $100  or  fraction 
thereof,  based  on  the  total  of  checks  and  drafts  presented  at  any 
one  time,  for  collection  or  payment  of  checks  and  drafts  and  re- 
mission therefor  by  exchange  or  otherwise;  but  no  such  charges 
shall  be  nxade  against  the  Federal  reserve  banks.  (Sec.  13,  Act 
Dec.  23,  1913,  as  amended  by  Act  March  3,  1915,  and  further 
by  Act  Sept.  7,  1916,  and  by  Sec.  4,  Act  June  21,  1917;  40  Stat. 
L.  234.) 

See  Regulation  J  of  the  Federal  Reserve  Board,  Series  of  1917  after 
$  265,  on  page  284. 

Deposits  by  Nonmembeb  Banks  in  Federal  Reserve  Banks. — That 
part  of  section  13  as  amended  by  the  act  approved  June  21,  1917,  which 
authorizes  Federal  Reserve  Banks  to  receive  deposits  from  nonmember 
banks  is  merely  permissive  and  not  mandatory,  and  in  accepting  any 
deposit  authorized  by  that  section  a  Federal  Reserve  Bank  may  prop- 
erly require  the  depositing  bank  to  maintain  a  balance  sufficient  to 
cover  checks  drawn  against  the  depositing  bank  as  well  as  items  re- 
ceived from  that  bank.     (Opinion  of  Counsel  of  Board,  July  10,  1917.) 

Deposits  of  Unfit  Currency. — Any  Federal  Reserve  Bank  may  prop- 
erly refuse  to  accept  deposits  of  unfit  currency  which  are  offered  to 
it  for  the  purpose  of  imposing  on  it  the  expense  of  shipment  to  Wash- 
ington for  redemption.     (Opinion  of  Counsel  of  Board,  Jan.  31,  1916.) 

Exchange  Charge  on  Banker's  Acceptance. — A  banker's  acceptance 
is  a  draft  within  the  meaning  of  this  section  and  a  member  bank  has 
no  legal  right  to  deduct  exchange  in  accounting  to  a  Federal  Reserve 
Bank  for  one  of  its  own  acceptances  forwarded  to  it  for  collection  by 
the  Federal  Reserve  Bank.    (Ruling  of  Board,  Feb.,  1920.) 

§  240.  Powers  of  Reserve  Banks — Discount  of  Notes,  Drafts 
and  Bills  of  Exchange. — Upon  the  indorsement  of  any  of  its 
member  banks,  which  shall  be  deemed  a  waiver  of  demand,  notice 
and  protest  by  such  bank  as  to  its  own  indorsement  exclusively,  any 
Federal  reserve  bank  may  discount  notes,  drafts,  and  bills  of  ex- 
change arising  out  of  actual  commercial  transactions;  that  is, 
notes,  drafts,  and  bills  of  exchange  issued  or  drawn  for  agricul- 


241 

tural,  industrial,  or  commercial  purposes,  or  the  proceeds  of  which 
have  been  used,  or  are  to  be  used,  for  such  purposes,  the  Federal 
Eeserve  Board  to  have  the  right  to  determine  or  define  the  char- 
acter of  the  paper  thus  eligible  for  discount,  within  the  meaning 
of  this  Act.  Nothing  in  this  Act  contained  shall  be  construed 
to  prohibit  such  notes,  drafts,  and  bills  of  exchange,  secured  by 
staple  agricultural  products,  or  other  goods,  wares,  or  merchandise 
from  being  eligible  for  such  discount;  but  such  definition  shall  not 
include  notes,  drafts,  or  bills  covering  merely  investments  or  is- 
sued or  drawn  for  the  purpose  of  carrying  or  trading  in  stocks, 
bonds,  or  other  investment  securities,  except  bonds  and  notes  of 
the  Government  of  the  United  States.  Notes,  drafts,  and  bills 
admitted  to  discount  under  the  terms  of  this  paragraph  must  have 
a  maturity  at  the  time  of  discount  of  not  more  than  ninety  days, 
exclusive  of  days  of  grace :  Provided,  That  notes,  drafts,  and  bills 
drawn  or  issued  for  agricultural  purposes  or  based  on  live  stock 
and  having  a  maturity  not  exceeding  six  months,  exclusive  of  days 
of  grace,  may  be  discounted  in  an  amount  to  be  limited  to  a  per- 
centage of  the  assets  of  the  Federal  reserve  bank,  to  be  ascertained 
and  fixed  by  the  Federal  Eeserve  Board.  (Sec.  13,  Act  Dec.  23, 
1913,  as  amended  by  Act  Sept.  7,  1916.) 

Regulation  A  of  Federal  Reserve  Board,  Series  of  1917  (Super- 
ceding Reg.  A  of  1916) — Rediscounts  Under  Section  13. 

A. 

Notes,  Drafts  and  Bills  of  Exchange. 

I.    General  Statutory  Provisions. 

Any  Federal  Reserve  Bank  may  discount  for  any  of  its  member 
banks  any  note,  draft,  or  bill  of  exchange  provided — 

(a)  It  has  a  maturity  at  the  time  of  discount  of  not  more  than  90 
days,  exclusive  of  days  of  grace;  but  if  drawn  or  issued  for  agricul- 
tural purposes  or  based  on  live  stock,  it  may  have  a  maturity  at  the 
time  of  discount  of  not  more  than  six  months,  exclusive  of  days  of 
grace. 

(b)  It  arose  out  of  actual  commercial  transactions;  that  is,  it  must 
be  a  note,  draft,  or  bill  of  exchange  which  has  been  issued  or  drawn 

10 


242 

for  agricultural,  industrial,  or  commercial  purposes,  or  the  proceeds 
of  which  have  been  used  or  are  to  be  used  for  such  purposes. 

(c)  It  was  not  issued  for  carrying  or  trading  in  stocks,  bonds,  or 
other  investment  securities,  except  bonds  and  notes  of  the  Government 
of  the  United  States. 

(d)  The  aggregate  of  notes,  drafts,  and  bills  bearing  the  signature 
or  indorsement  of  any  one  borrower,  whether  a  person,  company,  firm, 
or  corporation  rediscounted  for  any  one  member  bank  shall  at  no 
time  exceed  10  per  cent,  of  the  unimpaired  capital  and  surplus  of  such 
bank;  but  this  restriction  shall  not  apply  to  the  discount  of  bills 
of  exchange  drawn  in  good  faith  against  actually  existing  values. 

(e)  It  is  indorsed  by  a  member  bank. 

(f)  It  conforms  to  all  applicable  provisions  of  this  regulation. 


II.   General  Character  of  Notes,  Drafts,  and  Bills  of  Exchange 

Eligible. 

The  Federal  Reserve  Board,  exercising  its  statutory  rights  to  define 
the  character  of  a  note,  draft,  or  bill  of  exchange  eligible  for  redis- 
count at  a  Federal  Reserve  Bank,  has  determined  that — ■ 

(a)  It  must  be  a  note,  draft,  or  bill  of  exchange  the  proceeds  of 
which  have  been  used  or  are  to  be  used  in  producing,  purchasing,  carry- 
ing, or  marketing  goods*  in  one  or  more  of  the  steps  of  the  process 
of  production,  manufacture,  or  distribution. 

(b)  It  must  not  be  a  note,  draft,  or  bill  of  exchange  the  proceeds 
of  which  have  been  used  or  are  to  be  used  for  permanent  or  fixed  in- 
vestments of  any  kind,  such  as  land,  buildings,  or  machinery. 

(c)  It  must  not  be  a  note,  draft,  or  bill  of  exchange  the  proceeds 
of  which  have  been  used  or  are  to  be  used  for  investments  of  a  purely 
speculative  character. 

(d)  It  may  be  secured  by  the  pledge  of  goods  or  collateral,  provided 
it  is  otherwise  eligible. 

III.   Applications  for  Rediscount. 

All  applications  for  the  rediscount  of  notes,  drafts,  or  bills  of  ex- 
change must  contain  a  certificate  of  the  member  bank,  in  form  to  be 
prescribed  by  the  Federal  Reserve  Bank,  that,  to  the  best  of  its  knowl- 
edge and  belief,  such  notes,  drafts,  or  bills  of  exchange  have  been 
issued  for  one  or  more  of  the  purposes  mentioned  in  II  (a). 

*  When  used  in  this  regulation  the  word  "goods"  shall  be  construed 
to  include  goods,  wares,  merchandise,  or  agricultural  products,  in- 
cluding live  stock. 


243 

IV.  Promissory  Notes. 

(a)  Definition. — A  promissory  note,  within  the  meaning  of  this  reg- 
ulation, is  defined  as  an  unconditional  promise,  in  writing,  signed  by 
the  maker,  to  pay,  in  the  United  States,  at  a  fixed  or  determinable 
future  time,  a  sum  certain  in  dollars  to  order  or  to  bearer. 

(6)  Evidence  of  eligibility  and  requirement  of  statements. — A  Fed- 
eral Reserve  Bank  must  be  satisfied  by  reference  to  the  note  or  other- 
wise that  it  is  eligible  for  rediscount.  Compliance  of  a  note  with  II 
(6)  may  be  evidenced  by  a  statement  of  the  borro'wer  showing  a 
reasonable  excess  of  quick  assets  over  current  liabilities.  The  member 
bank  shall  certify  in  its  application  whether  the  note  offered  for  re- 
discount has  been  discounted  for  a  depositor  or  another  member  bank 
or  whether  it  has  been  purchased  from  a  nondepositor.  It  must  also 
certify  whether  a  financial  statement  of  the  borrower  is  on  file. 

Such  financial  statements  must  be  on  file  with  respect  to  all  notes 
offered  for  rediscount  which  have  been  purchased  from  sources  other 
than  a  depositor  or  a  member  bank.  With  respect  to  any  other  note 
offered  for  rediscount,  if  no  statement  is  on  file,  a  Federal  Reserve 
Bank  shall  use  its  discretion  in  taking  the  steps  necessary  to  satisfy 
itself  as  to  eligibility.  It  is  authorized  to  waive  the  requirement,  of 
a  statement  with  respect  to  any  note  discounted  by  a  member  bank 
for  a  depositor  or  another  member  bank — 

(1)  If  it  is  secured  by  a  warehouse,  terminal,  or  other  similar  re- 
ceipt covering  goods  in  storage. 

(2)  If  the  aggregate  of  obligations  of  the  borrower  rediscounted  and 
offered  for  rediscount  at  the  Federal  Reserve  Bank  is  less  than  a 
sum  equal  to  10  per  cent,  of  the  paid-in  capital  of  the  member  bank 
and  does  not  exceed  $5,000. 

V.   Drafts,  Bills  of  Exchange,  and  Trade  Acceptances. 

(a)  Definition. — A  draft  or  bill  of  exchange,  within  the  meaning  of 
this  regulation,  is  defined  as  an  unconditional  order  in  writing,  ad- 
dressed by  one  person  to  another,  other  than  a  banker  as  defined  under 
B  (b),  signed  by  the  person  giving  it,  requiring  the  person  to  whom 
it  is  addressed  to  pay,  in  the  United  States,  at  a  fixed  or  determinable 
future  time,  a  sum  certain  in  dollars  to  the  order  of  a  specified  person; 
and  a  trade  acceptance  is  defined  as  a  draft  or  bill  of  exchange  drawn 
by  the  seller  on  the  purchaser  of  goods  sold  and  accepted  by  such 
purchaser. 

(b)  Evidence  of  eligibility. — A  Federal  Reserve  Bank  shall  take  such 
steps  as  it  deems  necessary  to  satisfy  itself  as  to  the  eligibility  of  the 
draft  or  bill  offered  for  rediscount,  unles3  it  presents  prima  facie  evi- 


244 

dence  thereof  or  bears  a  stamp  or  certificate  affixed  by  the  acceptor  or 
drawer  showing  that  it  is  a  trade  acceptance. 

VI.  Six  Months'  Agbicultubal  Papeb. 

(a)  Definition. — Six  months'  agricultural  paper,  within  the  meaning 
of  this  regulation,  is  defined  as  a  note,  draft,  bill  of  exchange,  or  trade 
acceptance  drawn  or  issued  for  agricultural  purposes,  or  based  on  live 
stock;  that  is,  a  note,  draft,  bill  of  exchange,  or  trade  acceptance  the 
proceeds  of  which  have  been  used,  or  are  to  be  used,  for  agricultural 
purposes,  including  the  breeding,  raising,  fattening,  or  marketing  of 
live  stock,  and  which  has  a  maturity  at  the  time  of  discount  of  not 
more  than  six  months,  exclusive  of  days  of  grace. 

(6)  Eligibility. — To  be  eligible  for  rediscount  six  months'  agricul- 
tural paper,  whether  a  note,  draft,  bill  of  exchange,  or  trade  accept- 
ance, must  comply  with  the  respective  sections  of  this  regulation  which 
would  apply  to  it  if  its  maturity  were  90  days  or  less. 

VII.   Commodity  Papeb. 

(a)  Definition. — Commodity  paper  within  the  meaning  of  this  reg- 
ulation is  defined  as  a  note,  draft,  bill  of  exchange,  or  trade  acceptance 
accompanied  and  secured  by  shipping  documents  or  by  a  warehouse, 
terminal,  or  other  similar  receipt  covering  approved  and  readily  mar- 
ketable, nonperishable  staples  properly  insured. 

(&)  Eligibility. — To  be  eligible  for  rediscount  at  the  special  rates 
authorized  to  be  established  for  commodity  paper,  such  a  note,  draft, 
bill  of  exchange,  or  trade  acceptance  must  also  comply  with  the  re- 
spective sections  of  this  regulation  applicable  to  it,  must  conform  to 
the  requirements  of  the  Federal  Reserve  Bank  relating  to  shipping 
documents,  receipts,  insurance,  etc.,  and  must  be  a  note,  draft,  bill 
of  exchange,  or  trade  acceptance  on  which  the  rate  of  interest  or 
discount — including  commission — charged  the  maker,  does  not  exceed 
6  per  cent,  per  annum. 

(c)  Suspension  of  commodity  rate. — As  the  special  rate  on  com- 
modity paper  is  intended  to  assist  actual  producers  during  crop-moving 
periods  and  is  not  designed  to  benefit  speculators,  the  Board  reserves 
the  right  to  suspend  the  special  rates  herein  provided  whenever  it  is 
apparent  that  the  movement  of  crops,  which  this  rate  is  intended 
to  facilitate,  has  been  practically  completed. 

B. 

Bankeb's  Acceptances. 

(a)  General  statutory  provisions. — Any  Federal  Reserve  Bank  may 
discount  for  any  of  its  member  banks  bankers'  acceptances  which  have 


245 

a  maturity  at  the  time  of  discount  of  not  more  than  three  months' 
Bight,  exclusive  of  days  of  grace,  which  are  indorsed  by  at  least  one 
member  bank,  and  which  grow  out  of  transactions  involving  the  im- 
portation and  exportation  of  goods;  or,  which  grow  out  of  transactions 
involving  the  domestic  shipment  of  goods,  provided  shipping  docu- 
ments are  attached  at  the  time  of  acceptance;  or,  which  are  secured 
at  the  time  of  acceptance  by  a  warehouse  receipt  or  other  such  docu- 
ment conveying  or  securing  title  covering  readily  marketable  staples. 
Any  Federal  Reserve  Bank  may  also  acquire  drafts  or  bills  of  ex- 
change drawn  on  member  banks  by  banks  or  bankers  in  foreign 
countries  or  dependencies  or  insular  possessions  of  the  United  States 
for  the  purpose  of  furnishing  dollar  exchange. 

(&)  Definition. — A  banker's  acceptance  within  the  meaning  of  this 
regulation  is  denned  as  a  draft  or  bill  of  exchange  of  which  the  ac- 
ceptor is  a  bank  or  trust  company,  or  a  firm,  person,  company,  or 
corporation  engaged  in  the  business  of  granting  bankers'  acceptance 
credits. 

(c)  Eligibility.— >To  be  eligible  for  rediscount  the  bill  must  have 
been  drawn  under  a  credit  opened  for  the  purpose  of  conducting,  or 
settling  accounts  resulting  from,  a  transaction  or  transactions  involv- 
ing (1)  the  shipment  of  goods  between  the  United  States  and  any 
foreign  country,  or  between  the  United  States  and  any  of  its  de- 
pendencies or  insular  possessions,  or  between  foreign  countries,  or  (2) 
the  domestic  shipment  of  goods,  provided  shipping  documents  are 
attached  at  the  time  of  acceptance;  or  it  must  be  a  bill  which  is  se- 
cured at  the  time  of  acceptance  by  a  warehouse  receipt  or  other  such 
document  conveying  or  securing  title  covering  readily  marketable 
staples.  Any  Federal  Reserve  Bank  may  also  acquire  drafts  or  bills 
drawn  by  a  bank  or  banker  in  a  foreign  country  or  dependency  or 
insular  possession  of  the  United  States  for  the  purpose  of  furnishing 
dollar  exchange  and  accepted  by  a  member  bank  in  accordance  with 
the  provisions  of  Regulation  C,  page  262.  Such  drafts  or  bills  may  be 
acquired  prior  to  acceptance  provided  they  have  the  indorsement  of 
a  member  bank. 

(d)  Evidence  of  eligibility. — A  Federal  Reserve  Bank  must  be  satis- 
fied, either  by  reference  to  the  acceptance  itself  or  otherwise,  that  it 
is  eligible  for  rediscount.  Satisfactory  evidence  of  eligibility  may 
consist  of  a  stamp  or  certificate  affixed  by  the  acceptor  in  form  satis- 
factory to  the  Federal  Reserve  Bank. 

Rediscount  of  Drafts  Payable  on  Condition. — A  draft  made  "pay- 
able on  arrival  of  car"  is  nonnegotiable,  not  being  payable  at  a  deter- 
minable future  time,  and  is  therefore  ineligible  for  rediscount  by  a 
Federal  Reserve  Bank.     (Opinion  of  Counsel  of  Board,  Feb.  13,  1915.) 


246 

Rediscount  or  the  Assignment  of  Open  Accounts. — The  assignment 
of  an  open  account  is  not  negotiable  paper  and  is  not  elegible  for  re- 
discount by  a  Federal  Reserve  Bank  under  the  terms  of  section  13  of 
the  Federal  Reserve  Act.  (Opinion  of  Counsel  of  Board,  April  17, 
1916.) 

Agricultural  Products  or  Implements. — The  purchase  or  sale  of  an 
agricultural  product,  or  of  implements  or  other  commodities  used  in 
agriculture,  constitutes  a  commercial  transaction.  Where  the  proceeds 
of  a  note  made  by  a  merchant  are  used  to  purchase  seed  to  be  later 
retailed  or  sold,  such  a  note  can  not  be  treated  as  one  given  for  an 
agricultural  purpose  and  can  not  be  discounted  by  a  Federal  Reserve 
Bank  if  it  has  a  maturity  at  time  of  discount  of  more  than  90  days. 
(Opinion  of  Counsel  of  Board,  Sept.  15,  1916.) 

Trade  Acceptances  of  Retailers. — A  bill  of  exchange  drawn  by  the 
seller  of  goods  and  accepted  by  the  purchaser  of  those  goods  is  a  trade 
acceptance,  regardless  of  whether  or  not  the  purchaser  intends  to  resell 
the  goods  or  to  use  them  for  his  own  purpose.  (Informal  Ruling  of 
Eoard,  Dec.  24,  1917.) 

Drafts  Drawn  on  Sales  Corporations. — A  draft  drawn  by  a  corpora- 
tion upon  a  sales  corporation  which  it  and  a  number  of  other  con- 
cerns have  organized  will,  when  accepted,  become  a  trade  acceptance, 
even  though  the  selling  corporation  is  a  stockholder  of  the  sales  cor- 
poration, provided  the  latter  is  organized  in  good  faith  and  not  merely 
to  act  as  an  agent  for  the  purpose  of  evading  the  law.  (Opinion  of 
Counsel  of  Board,  Dec.  12,  1917.) 

Notes  for  Farm  Tools. — Notes  of  farmers  or  consumers  given  for 
the  purchase  price  of  farm  tools,  agricultural  machinery,  or  other 
farm-operating  equipment  are  discountable  under  section  13  of  the 
Federal  Reserve  Act,  which  provides  for  notes,  bills,  or  drafts  drawn 
or  issued  for  agricultural  purposes. 

Presentation  of  notes  of  farmers  or  consumers  for  the  purchase 
price  of  farm  tools  or  agricultural  machinery  by  the  dealer,  with  his 
indorsement  for  rediscount,  does  not  change  their  classification  as  for 
agricultural  purposes.     (Informal  Ruling  of  Board,  Dec.  30,  1915.) 

Chattel  Mortgages  Unnecessary. — The  act  does  not  require  the 
taking  of  chattel  mortgages  as  security  for  loans  based  on  agricultural 
operations.  The  direct,  primary  purpose  of  the  loan  should  be  for 
the  ordinary  operations  of  agriculture.  The  words  "based  on"  are  not 
considered  synonymous  with  "secured  by."     Agricultural  paper  need 


247 

not  be  directly  secured  by  agricultural  products,  but  should  be  gen- 
uinely based  upon  transactions  entered  upon  for  agricultural  opera- 
tions.    (Informal  Ruling  of  Board,  Jan.  9,  1915.) 

Rediscount  of  Participation  Certificate. — There  is  no  provision  in 
the  Federal  Reserve  Act  which  authorizes  a  Federal  Reserve  Bank  to 
rediscount  a  certificate  of  participation  in  a  note,  because  even  though 
the  original  note  is  eligible  for  rediscount,  a  participation  certificate 
nevertheless  is  nothing  more  than  the  evidence  of  an  equitable  interest 
in  that  original  note,  and  does  not  in  any  way  represent  a  legal  claim 
against  the  maker  of  the  note.  (Informal  Ruling  of  Board,  Nov.  1 
1917.) 

Indorsement  "Without  Recourse." — If  a  note  is  otherwise  eligible 
for  rediscount,  the  fact  that  it  bears  a  "without  recourse"  indorsement 
of  a  nonmember  bank  will  not  affect  its  eligibility.  (Opinion  of  Coun- 
sel of  Board,  July  3,  1918.) 

Note  of  Dealer. — A  note  made  by  dealer  in  agricultural  implements 
or  in  live  stock  is  not  agricultural  paper.  (Informal  Ruling  of  Board, 
July,  1915.) 

Paper  of  Merchants  and  Others. — "Commodity  paper"  includes  not 
only  paper  originating  with  the  producer,  but  also  paper  of  merchants 
and  others  when  the  commodity  is  not  carried  for  speculative  or  purely 
investment  purposes.     (Informal  Ruling  of  Board,  Sept.  8,  1915.) 

Purchases  from  Member  Banes. — Purchases  by  Federal  Reserve 
Banks  from  member  banks  of  commodity  loans  without  the  member 
banks'  indorsement  would  not  be  open-market  purchases,  because  such 
commodity  loans  are  in  the  form  of  ordinary  promissory  notes  or  one- 
name  paper.     (Informal  Ruling  of  Board,  Nov.  1G,  1915.) 

Discount  by  Meecantile  Firms  with  Federal  Reserve  Banks. — 
Federal  Reserve  Banks  can  not  discount  commodity  paper  directly 
for  mercantile  firms.     (Informal  Ruling  of  Board,  Feb.  1,  1916.) 

Finance  or  Credit  Companies,  Notes  of. — The  note  of  a  finance  or 
credit  company  which  is  drawn  either  directly  or  indirectly  to  finance 
some  industrial  or  commercial  concern  in  the  transaction  of  its  busi- 
ness is  not  eligible  for  rediscount,  even  though  it  may  be  secured  by 
paper  which  is  itself  eligible  for  rediscount.  (Informal  Ruling  of 
Board,  Feb.  11,  1918.) 


248 

Bills  Receivable  as  Collateral. — The  note  of  a  manufacturer  se- 
cured by  his  bills  receivable  is  desirable  paper,  and  should  certainly 
not  be  debarred  as  a  collateral  trust  note.  When  issued  for  the  purpose 
of  carrying  collateral  for  a  speculative  purpose  or  collateral  in  the 
nature  of  stocks  and  bonds  other  than  the  securities  of  the  United 
States,  the  note  would  not  be  eligible  for  rediscount.  (Informal  Ruling 
of  Board,  June  17,  1915.) 

Collateral  Notes. — The  fact  that  paper  otherwise  eligible  has  the 
additional  security  of  collateral  or  is  secured  by  real  estate  mortgage, 
in  no  way  affects  its  eligibility.  (Informal  Ruling  of  Board,  Aug.  12, 
1915;  Opinion  of  Counsel  of  Board,  May  3,  1917.) 

No  Limitation  on  Rediscounts. — Under  section  5202,  Revised  Sta- 
tutes, a  National  bank  may  not  borrow  as  bills  payable  in  excess  of 
its  capital  stock.  Under  the  Federal  Reserve  Act  it  may  rediscount 
actual  items  of  paper  in  its  possession  to  any  amount  in  the  discretion 
of  the  Federal  Reserve  Bank  of  its  district.  (Informal  Ruling  of 
Board,  Jan.  29,  1916.) 

Loans  Directly  to  Individuals. — Federal  Reserve  Banks  do  not 
make  loans  directly  to  individuals,  but  rediscount  the  paper  of  mem- 
ber banks  which  are  all  National  banks  and  such  State  banks  as  may 
have  joined  the  Federal  Reserve  System.  (Informal  Ruling  of  Board, 
May  2,  1916.) 

Drafts  Payable  on  or  Before  Certain  Date. — Drafts  payable  "ninety 
days  from  date  or  before  on  five  days  after  demand  (i.  e.,  on  five  days' 
notice)  by  the  holder  hereof"  are  negotiable  and  eligible  for  discount 
with  a  Federal  Reserve  Bank.  (Opinion  of  Counsel  of  Board,  Feb. 
23,  1917.) 

Notes  Payable  "On  or  Before." — 'Notes  payable  "on  or  before"  a 
certain  date  are  eligible  for  rediscount  with  Federal  Reserve  Banks 
provided  they  conform  to  the  law  and  regulations  of  the  Board  in 
other  respects.     (Informal  Ruling  of  Board,  June  28,  1916.) 

Demand  Notes. — A  demand  note  or  bill  is  not  eligible  for  rediscount 
since  it  is  not  in  terms  payable  within  90  days,  but  at  the  option  of 
the  holder  may  not  be  presented  for  payment  until  after  that  time. 
(Informal  Ruling  of  Board,  April  19,  1917.)  A  note  payable  "on  de- 
mand, and  if  no  demand  is  made  thereon "  is  eligible  for  redis- 
count if  the  date  filled  in  the  blank  is  not  more  than  90  days  from  the 
date  of  discount.     (Informal  Ruling  of  Board,  June  15,  1917.) 


249 

"Staples"  Defined. — "Staples"  as  used  in  Reg.  A,  series  of  1917, 
include  manufactured  goods  as  well  as  raw  materials,  provided  the 
goods  are  nonperishable  and  have  a  wide  ready  market.  (Informal 
Ruling  of  Board,  Sept.  7,  1916.) 

A  readily  marketable  staple  may  be  defined  as  an  article  of  com- 
merce, agriculture,  or  industry  of  such  uses  as  to  make  it  the  subject 
of  constant  dealings  in  ready  markets  with  such  frequent  quotations 
of  prices  as  to  make  (a)  the  price  easily  and  definitely  ascertainable 
and  (b)  the  staple  itself  easy  to  realize  upon  by  sale  at  any  time. 
(Ruling  of  Board,  July,  1919.) 

Rate  op  Interest. — State  law  governs  the  rate  of  interest  which 
National  banks  may  charge.  Board  approves  the  rate  of  rediscount 
which  may  be  charged  by  Federal  Reserve  Banks.  (Informal  Ruling 
of  Board,  Nov.  21,  1916.) 

Indorsements  of  Negotiable  Paper. — An  indorsement  of  negotiable 
paper  which  is  made  upon  a  separate  piece  of  paper  attached  to  the 
original  instrument  is  a  valid  indorsement  of  such  instrument,  and 
paper  so  indorsed  may  be  rediscounted  by  reserve  banks.  (Opinion 
of  Counsel  of  Board,  July  12,  1916.) 

Trade  Acceptance  Providing  for  Discount  if  Paid  at  Maturity. — A 
trade  acceptance  which  consists  of  an  order  to  pay  a  certain  amount, 
which  is  the  amount  of  the  debt  minus  a  discount  for  prompt  pay- 
ment at  maturity,  or,  if  not  paid  at  maturity,  to  pay  a  greater  amount, 
which  is  the  amount  of  the  debt  without  any  discount,  is  an  order  to 
pay  a  sum  certain  and  is  negotiable.  (Opinion  of  Counsel  of  Board, 
Jan.  26,  1918.) 

Discount  of  Paper  Secured  by  or  Issued  for  Purposes  of  Trading 
in  Bonds  or  Notes  of  the  United  States. — Any  member  bank  may 
rediscount  with  its  Federal  Reserve  Bank  a  note,  draft,  or  bill  drawn 
for  the  purpose  of  carrying  or  trading  in  bonds  or  notes  of  the  United 
States  (Opinion  of  Counsel  of  Board,  Feb.  16,  1917.) ;  War  Savings 
Stamps,  however,  are  not  included  in  this  category  of  bonds  or  notes 
of  the  United  States.     (Opinion  of  Counsel  of  Board,  June  8,  1918.) 

§  241.  Limitation  on  Aggregate  of  Paper  of  One  Borrower  Re- 
discounted  for  Any  One  Bank. — The  aggregate  of  such  notes, 
drafts,  and  bills  bearing  the  signature  or  indorsement  of  any  one 
borrower,  whether  a  person,  company,  firm,  or  corporation,  redis- 
counted for  any  one  bank  shall  at  no  time  exceed  ten  per  centum 


250 

of  the  unimpaired  capital  and  surplus  of  said  bank;  but  this  re- 
striction shall  not  apply  to  the  discount  of  bills  of  exchange  drawn 
in  good  faith  against  actually  existing  values.  (Sec.  13,  Act  Dec. 
23,  1913,  as  amended  by  Act  Sept.  7,  1916.) 

Limit  of  10  Per  Cent,  to  One  Maker  or  Ixdorser. — If  any  particular 
paper  presented  by  a  member  bank  to  a  Federal  Reserve  Bank  for 
rediscount,  singly  or  added  to  the  paper  of  the  same  makers  or  in- 
dorsers  which  the  Federal  Reserve  Bank  has  already  rediscounted  for 
said  member  bank,  amounts  to  a  total  of  more  than  10  per  cent,  of 
the  unimpaired  capital  and  surplus  of  that  bank,  the  Federal  Reserve 
Bank  has  no  authority  for  such  rediscount.  (Informal  Ruling  of 
Board,  April  17,  1916.)  Such  limitations,  however,  do  not  refer  to 
the  indorsement  of  a  non-member  bank  on  paper  rediscounted  with 
a  member  bank.     (Informal  Ruling  of  Board,  May  1,  1918.) 

Limit  of  Rediscounts  of  Commercial  or  Business  Paper. — While 
a  member  bank  may  acquire  commercial  or  business  paper  such  as 
trade  acceptances  from  the  same  person  in  excess  of  10  per  cent,  of 
its  unimpaired  capital  and  surplus  (sec.  5200,  U.  S.  R.  S.),  its  Federal 
Reserve  Bank  can  not  rediscount  such  paper  bearing  the  signature 
or  indorsement  of  the  same  person  in  excess  of  that  amount  unless 
they  can  be  classified  also  as  "bills  of  exchange  drawn  against  actually 
existing  values."     (Opinion  of  Counsel  of  Board,  Aug.  21,  1918.) 

Section  13,  Federal  Reserve  Act,  does  not  amend  section  5200,  United 
States  Revised  Statutes.     (Opinion  of  Counsel  of  Board,  May  9,  1916.) 

Trade  Acceptances  as  Bills  Drawn  Against  Actually  Existing 
Values. — Bills  drawn  by  the  seller  against  the  purchaser  and  accepted 
before  the  sale  or  delivery  of  the  goods  should  not  be  treated  as  bills 
drawn  against  actually  existing  values,  since  such  goods  are  not  in 
the  possession  of  the  drawee  either  in  the  original  form  or  in  the 
shape  or  the  proceeds  of  their  sale;  except  where  the  goods  have 
passed  out  of  the  possession  of  the  drawer  and  have  been  placed  in 
storage  subject  to  the  control  or  order  of  the  drawee.  (Opinion  of 
Counsel  of  Board,  Aug.  21,  191S.) 

What  a  Federal  Reserve  Bank  Mat  Discount  for  Its  Member 
Banks. — The  limitations  imposed  upon  the  amounts  of  rediscounts 
which  a  Federal  Reserve  Bank  may  make  for  a  member  bank,  whether 
State  or  National,  are  determined  by  the  provisions  of  the  Federal 
Reserve  Act  and  are  not  in  any  way  affected  by  the  amendment  to 
Section  5200. 

In  the  opinion  of  the  Federal  Reserve  Board  this  phrase  "bills  of 


251 

exchange  drawn  against  actually  existing  values"  includes,  among 
other  kinds  of  paper  "drafts'  or  bills  of  exchange  secured  by  shipping 
documents  conveying  or  securing  title  to  goods  shipped"  and  "bankers' 
acceptances  of  the  kinds  described  in  Section  13  of  the  Federal  Re- 
serve Act"  even  though  Section  13  (unlike  the  amendment  to  Section 
5200)  does  not  expressly  state  that  those  two  classes  of  paper  are 
bills  of  exchange  drawn  against  actually  existing  values.  In  the 
opinion  of  the  Board,  however,  accepted  demand  bills  on  which  the 
drawer  is  released  from  liability  are  not  "bills  of  exchange"  within 
the  meaning  of  Section  13  and  must,  therefore,  be  included  in  deter- 
mining the  limits  on  the  amount  of  paper  any  one  borrower  which  a 
Federal  Reserve  Bank  may  rediscount  for  any  member  bank.  (Ruling 
of  Board,  Nov.,  1919.) 

Bills  of  Exchange  Drawn  Against  Actually  Existing  Value. — 
A  bill  of  exchange  discounted  before  acceptance  may  be  said  to  be 
drawn  against  actually  existing  value,  within  the  meaning  of  Section 
13  of  the  Federal  Reserve  Act,  when  and  only  when  it  is  accompanied 
by  shipping  documents,  warehouse  receipts,  or  other  papers  securing 
title  to  the  goods  sold.  An  accepted  bill  of  exchange,  unaccompanied 
by  shipping  documents  or  other  such  papers,  may  be  considered  as 
drawn  against  actually  existing  value  if  drawn  against  the  drawee 
at  the  time  of,  or  within  a  reasonable  time  after,  the  shipment  or 
delivery  of  the  goods  sold.  In  this  latter  case  there  must  be  reason- 
able grounds  to  believe  that  the  goods  are  in  existence  in  the  hands 
Of  the  drawee  either  in  their  original  form  or  in  the  shape  of  the 
proceeds  of  their  sale.     (Opinion  of  Counsel  of  Board,  Nov.  27,  1916.) 

Rediscounts  of  Commercial  ok  Business  Paper  for  a  Member  State 
Bank. — Under  the  terms  of  Section  13  no  Federal  Reserve  Bank  may 
properly  rediscount  for  any  State  member  bank  the  paper  of  any  one 
borrower  in  excess  of  10  per  cent,  of  the  capital  and  surplus  of  that 
member  bank.  Bills  of  exchange  which  are  drawn  against  actually 
existing  values  are  expressly  excepted  from  this  limitation  but  com- 
mercial or  business  paper  must  be  included  within  it.  (Opinion  of 
Counsel  of  Board,  Dec,  1919.) 

Limitation  Upon  the  Aggregate  Rediscounts  of  the  Paper  of  One 
Borrower  Made  for  Different  Member  Banks. — A  Federal  Reserve 
Bank  may  properly  decline  to  discount  for  a  member  bank  the  paper 
of  any  one  borrower  on  the  ground  that  the  Federal  Reserve  Bank 
has  theretofore  discounted  for  other  member  banks  what  it  deems  to 
be  a  sufficient  amount  of  that  particular  borrower's  paper.  (Opinion 
of  Counsel  of  Board,  March,   1920.) 


252 

§  242.  Powers  of  Reserve  Banks — Discount  of  Acceptances. — 
Any  Federal  reserve  bank  may  discount  acceptances  of  the  kinds 
hereinafter  described,  which  have  a  maturity  at  the  time  of  dis- 
count of  not  more  than  three  months'  sight,  exclusive  of  days  of 
grace,  and  which  are  indorsed  by  at  least  one  member  bank.  (Sec. 
13,  Act  Dec.  23,  1913,  as  amended  by  Act  Sept.  7,  1916.) 

Discount  of  Acceptances  Indorsed  by  Member  Banks  Located  in 
Another  District. — In  the  discount  of  acceptances  by  Federal  Reserve 
Banks  in  accordance  with  the  provisions  of  Section  13,  it  is  immaterial 
whether  the  member  bank  is  located  in  the  district  of  the  Federal 
Reserve  Bank  which  is  making  the  discount  or  in  any  other  district, 
the  term  "member  bank"  being  broad  enough  to  include  member  banks 
wherever  located. 

Such  discounts,  being  made  under  the  provisions  of  Section  13,  are 
eligible  as  collateral  security  for  Federal  Reserve  notes  issued  under 
the  provisions  of  Section  16.  (Opinion  of  Counsel  of)  Board,  April  30, 
1915.) 

Member  Banks'  Acceptances,  Status  of. — An  acceptance  which  has 
been  purchased  by  the  accepting  bank  and  subsequently  rediscounted 
with  its  Federal  Reserve  Bank  is  not  subject  to  the  limitations  of 
Section  5200  of  the  Revised  Statutes.  (Opinion  of  Counsel  of  Board, 
July  26,  1917.) 

Discount  of  Renewals. — The  acceptance  business  of  Federal  Re- 
serve Banks  is  not  restricted  "to  the  original  transaction  only." 
"When  the  first  acceptance  matures  the  member  bank  may  renew  the 
acceptance,  and  there  is  no  reason  why  a  Federal  Reserve  Bank  may 
not  discount  such  renewed  acceptance  although  a  Federal  Reserve 
Bank  must  not  engage  in  advance  to  make  such  discount  of  a  renewal. 
(Informal  Ruling  of  Board,  June  16,  1915.) 

Conditions  Attached  to  and  Affecting  Negotiability  of  Bills  of 
Exchange  and  Acceptances. — A  bill  of  exchange,  in  order  to  be  ne- 
gotiable, must  be  an  unconditional  order  to  pay,  on  demand  or  at  a 
fixed  or  determinable  future  time,  a  certain  sum  of  money  to  order 
to  bearer.  If  payment  is  dependent  upon  the  happenings  of  a  cer- 
tain contingency,  the  bill  is  conditional  and  nonnegotiable.  If  pay- 
ment is  confined  to  the  proceeds  of  a  particular  fund  and  is  not 
chargeable  to  the  general  credit  of  the  drawer,  the  bill  is  conditional 
and  nonnegotiable. 

A  general  acceptance  of  a  conditional  bill  or  a  conditional  acceptance 


253 

of  an  unconditional  bill  makes  the  acceptance  a  conditional  one  and 
destroys  its  negotiability. 

There  is  some  doubt  in  the  courts  whether  the  mere  reference  to  a 
particular  consignment  of  goods  makes  the  bill  conditional,  some 
courts  stating  that  it  is  merely  an  indication  of  the  fund  out  of  which 
the  drawee  is  to  reimburse  himself;  other  courts  holding  that  it  makes 
the  bill  conditional  because  limiting  payment  to  the  proceeds  of  the 
particular  shipment  referred  to.  There  is  no  doubt,  however,  that 
a  reference,  in  general  terms,  on  the  face  of  an  accepted  bill  to  the 
fact  that  it  is  based  on  the  exportation  or  importation  of  goods,  would 
not  make  it  conditional  and  nonnegotiable,  and  it  would  not,  therefore, 
be  ineligible  for  discount  under  the  provisions  of  Section  13  of  the 
Federal  Reserve  Act.     (Opinion  of  Counsel  of  Board,  Feb.  2,  1915.) 

Differential  as  to  Acceptances. — 'There  is  no  objection  to  a  mod- 
erate differential  to  apply  between  the  discount  by  the  reserve  bank  of 
member  bank  acceptances  and  those  of  non-member  institutions.  (In- 
formal Ruling  of  the  Board,  Dec.  4,  1916.) 

§  243.  Foreign  and  Domestic  Acceptances  by  Member  Banks. — 
Any  member  bank  may  accept  drafts  or  bills  of  exchange  drawn 
upon  it  having  not  more  than  six  months'  sight  to  run,  exclusive 
of  days  of  grace,  which  grow  out  of  transactions  involving  the 
importation  or  exportation  of  goods;  or  which  grow  out  of  trans- 
actions involving  the  domestic  shipment  of  goods  provided  ship- 
ping documents  conveying  or  securing  title  are  attached  at  the 
time  of  acceptance;  or  which  are  secured  at  the  time  of  accept- 
ance by  a  warehouse  receipt  or  other  such  document  conveying 
or  securing  title  covering  readily  marketable  staples.  No  mem- 
ber bank  shall  accept,  whether  in  a  foreign  or  domestic  transaction, 
for  any  one  person,  company,  firm,  or  corporation  to  an  amount 
equal  at  any  time  in  the  aggregate  to  more  than  ten  per  centum 
of  its  paid-up  and  unimpaired  capital  stock  and  surplus,  unless 
the  bank  is  secured  either  by  attached  documents  or  by  some  other 
actual  security  growing  out  of  the  same  transaction  as  the  ac- 
ceptance; and  no  bank  shall  accept  such  bills  to  an  amount  equal 
at  any  time  in  the  aggregate  to  more  than  one-half  of  its  paid-up 
and  unimpaired  capital  stock  and  surplus :  Provided,  hoivever, 
That  the  Federal  Eeserve  Board,  under  such  general  regulations 
as  it  may  prescribe,  which  shall  apply  to  all  banks  alike  regard- 


254 

less  of  the  amount  of  capital  stock  and  surplus,  may  authorize 
any  member  bank  to  accept  such  bills  to  an  amount  not  exceed- 
ing at  any  time  in  the  aggregate  one  hundred  per  centum  of  its 
paid-up  and  unimpaired  capital  stock  and  surplus :  Provided  fur- 
ther, That  the  aggregate  of  acceptances  growing  out  of  domestic 
transactions  shall  in  no  event  exceed  fifty  per  centum  of  such 
capital  stock  and  surplus.  (Sec.  13,  Act  Dec.  23,  1913,  as  amended 
by  Act  Sept.  7,  191G,  and  further  by  Sec.  5,  Act  June  21,  1917; 
40  Stat.  L.,  235.) 

Acceptances  to  Finance  Future  Importations. — Drafts  drawn  for 
the  purpose  of  importing  goods  are  properly  acceptable  by  member 
banks  whether  or  not  the  sale  of  the  goods  has  actually  been  made 
at  the  time  of  acceptance.  It  is  not  even  necessary  that  the  goods  to 
be  sold  be  identified  at  the  time  of  acceptance.  The  accepting  bank 
must  be  reasonably  sure,  however,  that  the  proceeds  will  be  used  for 
the  purpose  specified.     (Informal  Ruling  of  Board,  June  14,  1917.) 

Acceptances  in  Excess  of  10  Percent. — The  acceptance  by  a  bank 
of  unsecured  drafts  to  an  amount  exceeding  10  per  cent,  of  the  capital 
and  surplus  of  the  bank  would  constitute  a  violation  of  the  limitation 
contained  in  this  section,  whether  or  not  the  customer  of  the  bank 
guaranteeing  the  acceptance  is  the  drawer  of  the  draft,  or  some  other 
person.  (Opinion  of  Counsel  of  Board,  Dec.  23,  1918.)  A  member 
bank  may  accept  either  in  a  domestic  or  foreign  transaction  for  one 
person  in  an  amount  in  excess  of  10  per  cent,  provided  the  acceptance 
remains  secured  throughout  the  life  of  the  draft.  It  can  not  accept 
in  domestic  transactions  without  being  secured  at  the  time  of  accept- 
ance, but  may  release  the  security  after  acceptance  upon  the  execu- 
tion of  a  trust  receipt  or  an  agreement  by  the  customer  that  so  much 
of  the  proceeds  of  the  sale  of  the  go'ods  covered  by  the  security  as 
may  be  necessary  to  pay  the  draft  will  be  deposited  with  the  accepting 
bank  when  available  and  will  not  be  used  for  other  purposes.  (Ruling 
of  Board,  Jan.  7,  1919.) 

Bankers'  Acceptances  Against  Open  Accounts  of  Foreign  Pur- 
chasers.— National  banks  can  not  accept  drafts  for  the  purpose  of 
enabling  domestic  concerns  to  extend  credits  on  open  account  to 
foreign  purchasers.     (Opinion  of  Counsel  of  Board,  Jan.  29,  1919.) 

Domestic  Acceptances — Security  and  Limitations. — Although  Sec- 
tion 13  of  the  Federal  Reserve  Act  authorizes  member  banks  to  ac- 


255 

cept  drafts  drawn  in  domestic  transactions  only  when  secured  at 
the  time  of  acceptance  by  attached  shipping  documents  or  warehouse 
receipts  or  other  such  documents,  nevertheless  the  security  may 
properly  be  released  after  acceptance;  provided,  however,  that  in  any 
case  where  the  total  amount  accepted  for  any  one  customer  exceeds 
10  per  cent  of  the  capital  and  surplus  of  the  accepting  bank  the  se- 
curity can  not  be  released  unless  some  other  actual  security  growing 
out  of  the  same  transaction  is  substituted  therefor.  A  trust  receipt 
which  permits  the  customer  for  whom  the  draft  is  accepted  to  obtain 
control  of  the  goods  is  not  actual  security  for  the  purposes  of  this 
section  of  the  law.     (Opinion  of  Counsel  of  Board,  Feb.  28,  1919.) 

Security  Covering  Acceptances  in  Excess  of  10  Per  Cent.  Limita- 
tion of  Section  13. — Under  the  provisions  of  Section  13  a  member 
bank  may  accept  for  any  one  customer  in  excess  of  10  per  cent,  of 
its  capital  and  surplus,  provided  it  is  secured  by  attached  documents 
or  by  some  other  actual  security  growing  out  of  the  same  transaction 
as  to  all  acceptances  in  excess  of  that  10  per  cent,  limitation.  (Opin- 
ion of  Counsel  of  Board,  April  1,  1919.) 

Renewal  of  Drafts  Drawn  by  the  Purchaser  of  Goods  and  Se- 
cured at  the  Time  of  Original  Acceptance  by  Warehouse  Receipts 
or  Bhls  of  Lading. — As  defined  in  an  opinion  published  on  page  380 
of  the  May  1917,  Bulletin,  a  draft  drawn  by  the  purchaser  of  goods 
is  not  eligible  for  acceptance  merely  because  it  is  secured  at  the  time 
of  acceptance  by  a  bill  of  lading  covering  the  goods  bought.  It  must 
be  established  that  the  proceeds  of  the  draft  are  applied  to  the  pay- 
ment of  those  goods.  No  National  bank  may  properly  accept  the  re- 
newal of  a  draft  drawn  by  the  purchaser  of  goods  and  secured  at  the 
time  of  original  acceptance  by  a  bill  of  lading  or  warehouse  receipt 
unless  the  renewal  acceptance  complies  with  the  terms  of  the  law 
and  the  rulings  and  regulations  of  the  Board  applicable  to  the  original 
acceptance.     (Opinion  of  Counsel  of  Board,  Jan.,  1920.) 

Acceptance  of  Drafts  Drawn  Abroad  and  Secured  by  Foreign  Ware- 
house Receipts. — A  draft  drawn  abroad,  payable  in  the  United  States 
in  dollars  and  secured  by  a  warehouse  receipt  covering  readily  market- 
able staples  stored  in  a  warehouse  located  in  a  foreign  country,  is 
eligible  for  acceptance  by  a  member  bank  and  after  acceptance  is 
eligible  for  rediscount  by  a  Federal  Reserve  Bank  under  the  provisions 
of  Section  13  of  the  Federal  Reserve  Act,  but,  under  the  terms  of 
the  Board's  present  regulations,  is  not  eligible  for  purchase  by  a 
Federal  Reserve  Bank  in  the  open  market,  under  the  provisions  of 
Section  14  of  the  Federal  Reserve  Act.  (Opinion  of  Counsel  of  Board, 
July  25,  1919.) 


256 

Acceptance  of  Drafts  Secured  by  Warehouse  Receipts. — The  Fed- 
eral Reserve  Board  is  of  the  opinion  that  no  draft  which  is  secured 
by  a  warehouse  receipt  should  properly  be  considered  eligible  for 
acceptance  under  the  terms  of  Section  13  unless  the  goods  covered 
by  the  warehouse  receipt  are  being  held  in  storage  pending  a  reason- 
ably immediate  sale,  shipment,  or  distribution  into  the  process  of 
manufacture.  Any  draft  therefore  which  is  drawn  to  carry  goods 
for  speculative  purposes  or  for  any  indefinite  period  of  time  without 
the  purpose  to  sell,  ship,  or  manufacture  within  a  reasonable  time, 
should  not  be  considered  eligible  for  acceptance  under  the  provisions 
of  Section  13.  Such  a  draft  would  be  merely  a  cloak  to  evade  the 
restrictions  of  Section  5200  of  the  Revised  Statutes  and  is  not  one 
of  the  kinds  which  Congress  intended  to  make  eligible  for  acceptance. 
(Ruling  of  Board,  Sept.,  1919.) 

Drafts  with  Documents  Attached — Conveyance  of  Title. — Under 
the  provision  of  Section  13,  which  authorizes  any  member  bank  to  ac- 
cept drafts  based  upon  domestic  shipment  of  goods,  provided  shipping 
documents  conveying  or  securing  title  are  attached,  such  documents 
must  be  made  out  or  indorsed  so  as  to  convey  or  secure  title  to  the 
accepting  bank.     (Opinion  of  Counsel  of  Board,  Jan.  31,  1918.) 

Bankers'  Export  Acceptances  Defined. — Where  a  dealer  is  engaged 
in  purchasing  the  same  character  of  goods  for  export  and  for  do- 
mestic use,  a  member  bank  accepting  his  draft  drawn  to  finance  an 
export  transaction  should  require  proper  assurances  that  proceeds 
of  draft  are  to  be  used  in  connection  with  such  export  transaction 
and  that  the  acceptance  will  be  paid  out  of  pro'ceeds  of  sale  of  goods 
exported.     (Opinion  of  Counsel  of  Board,  April  1,  1918.) 

Drafts  with  Documents  Attached — Definition. — A  provision  of 
Section  13  which  authorizes  any  member  bank  to  accept  drafts  based 
upon  the  domestic  shipment  of  goOds,  provided  shipping  documents 
are  "attached,"  should  not  be  construed  so  as  to  require  that  the 
documents  be  physically  fastened  to  the  draft.  It  is  sufficient  if  the 
accepting  bank  has  possession  of  the  documents  at  the  time  of  accept- 
ance.    (Opinion  of  Counsel  of  Board,  Sept.  14,  1917.) 

Acceptances  of  Member  Banks. — (a)  The  limitations  imposed  by 
Section  5202,  Revised  Statutes,  on  the  liabilities  incurred  by  any  Na- 
tional bank  do  not  apply  to  acceptances  of  such  banks. 

(b)  A  member  bank  may  legally  purchase  its  own  acceptances,  but 
such  a  transaction  is  equivalent  to  a  loan  or  advance  to  the  custoiner 
for  whom  the  acceptance  was  made  and  the  liability  of  such  customer 


257 

becomes  subject  to  the  limitations  of  Section  5200,  Revised  Statutes. 

(c)  The  limitations  imposed  by  Section  5200,  Revised  Statutes,  on 
the  amount  of  money  which  may  be  borrowed  by  any  individual  from 
a  member  bank  do  not  apply  to  acceptances  of  such  bank. 

(d)  The  power  of  member  banks  to  accept  drafts  or  bills  of  ex- 
change should  not  be  confused  with  the  power  to  discount  the  ac- 
ceptances of  others.     (Opinion  of  Counsel  of  Board,  Oct.  27,  1916.) 

Acceptances  by  Cobbespondents — When  a  Dieect  Liability. — 'Drafts 
accepted  by  fo'reign  correspondents  at  the  request,  and  under  the 
guarantee  of  a  National  bank  in  the  United  States,  should  be  re- 
ported as  a  direct  liability  of  such  National  bank,  and  should  be 
treated  as  subject  to  the  limitations  imposed  by  the  Federal  Reserve 
Act  on  the  acceptance  power  of  National  banks.  (Opinion  of  Counsel 
of  Board,  March  7,  1918.) 

Teust  Receipts  as  Actuax  Secubity  foe  Acceptance  Teansactions. — 
If  an  acceptance  is  secured  by  shipping  documents  which  are  sur- 
rendered by  the  acceptor  for  a  trust  receipt  which  permits  the  pur- 
chaser of  the  goods  to  retain  control  of  the  goods,  the  accepting  bank 
can  not  be  said  to  be  secured  "by  some  other  actual  security"  as  pro- 
vided in  Section  13  of  the  Federal  Reserve  Act.  A  trust  receipt,  how- 
ever, which  does  not  permit  the  purchaser  to  procure  control  of  the 
goods,  may  properly  be  said  to  be  actual  security  within  the  meaning 
of  the  act.     (Opinion  of  Counsel  of  Board,  Oct.  12,  1917.) 

"Warehouse  Receipts. — Warehouse  receipts  offered  as  security  for 
bills  accepted  by  member  banks  under  authority  of  Section  13  of  the 
Federal  Reserve  Act  must  be  issued  by  warehouses  which  are  inde- 
pendent of  the  borrower.  The  corporation  issuing  such  receipt  must 
be  organize  in  good  faith  as  an  independent  corporation,  and  its 
affairs  must  be  administered  by  duly  authorized  officers  and  agents 
independent  of  the  borrower  in  order  to  comply  with  the  rulings  of 
the  Board  referred  to.     (Informal  Ruling  of  Board,  Nov.  30,  1917.) 

Agreements  to  Accept. — While  a  letter  of  credit  or  credit  agreement 
may  lawfully  be  made  by  a  National  bank  which  will  extend  by  its 
terms  for  a  period  exceeding  six  months,  the  agreement  must  not  be 
of  such  a  character  as  will  impose  upon  the  holders  of  drafts  accepted 
thereunder  any  obligation  to  renew  such  drafts  so  that  the  period  of 
acceptance  shall  exceed  six  months  in  duration  as  to  any  specified 
draft.     (Informal  Ruling  of  Board,  August,  1915.) 

Identification    oe    Specific   Goons. — It   is   not   necessary    that   the 
specific   goods   covered   by    an   acceptance   based   upon    an   import   or 
17 


258 

export  transaction  must  be  identified  at  the  time  of  the  acceptance.  In 
interpreting  the  word  "involved"  in  connection  with  the  importation 
or  exportation  of  goods,  upon  which  an  acceptance  has  been  based,  it 
is  held  that  goods  may  be  purchased  and  shipped  subsequent  to  the 
time  of  the  first  acceptance,  provided  that  there  is  a  definite  bona 
fide  contract  for  the  shipment  of  the  goods  within  a  specified  and 
reasonable  time.     (Informal  Ruling  of  Board,  Nov.  9,  1915.) 

Assurances  to  Banks. — 'Member  banks  may  best  protect  themselves 
in  determining  whether  acceptances  are  based  upon  the  exportation  or 
importation  of  goods  by  stipulating  the  right  at  times  to  ask  for  sub- 
stantiation of  assurances  from  a  customer.  (Informal  Ruling  of  Board, 
Nov.  9,  1915.) 

Acceptance  by  Member  Banks  op  Drafts  Drawn  in  Transactions 
Involving  Export  of  Goods. — A  dealer  having  drawn  drafts  accepted 
by  a  member  bank  in  an  export  transaction  should  be  given  the  option, 
with  the  consent  of  the  accepting  bank,  to  secure  such  drafts  in  the 
manner  required  of  those  drawn  in  domestic  transactions  if  he  wishes 
to  use  the  proceeds  derived  from  the  sale  of  the  goods  exported  for 
purposes  other  than  the  payment  of  such  acceptances.  (Opinion  of 
Counsel  of  Board,  April  11,  1918.) 

Acceptances  Covebing  Domestic  Shipments  of  Goods. — A  draft 
drawn  upon  a  National  bank  covering  current  domestic  shipments  of 
goods  is  not  eligible  for  acceptance  by  such  bank  under  the  pro- 
visions of  Section  13  of  the  Federal  Reserve  Act  unless  shipping  docu- 
ments are  attached  at  the  time  of  acceptance.  (Opinion  of  Counsel 
of  Board,  April  29,  1919.) 

Mere  Acceptance  and  Ten  Per  Cent.  Limitation. — The  10  per  cent, 
limitation  imposed  by  Section  5200  of  the  Revised  Statutes  is  not  in- 
tended to  apply  to  the  mere  acceptance  of  a  bill  of  exchange,  but  the 
provisions  of  Section  5200  would  apply  to  the  indebtedness  arising 
between  the  drawer  of  the  bill  and  the  accepting  bank  in  case  the 
drawer  fails  to  furnish  funds  with  which  to  meet  the  acceptance  at 
maturity.     (Informal  Ruling  of  Board,  Jan.  3,  1916.) 

Acceptances  and  Stamp  Tax. — Drafts,  acceptances,  overdrafts,  and 
post-dated,  checks  are  not  taxable  under  the  Act  approved  October  22, 
1914,  as  promissory  notes.  (Ruling  of  Commissioner  of  Internal 
Revenue,  April  3,  1916.) 

Character  of  Bills  That  May  Be  Accepted  by  Member  Banks. — A 
member  bank  can  not  legally  accept  a  bill  drawn  upon  it  by  an  ac- 


259 

ceptance  house  for  the  purpose  of  reimbursing  itself  and  secured  col- 
laterally by  an  acceptance  based  upon  the  importation  or  exportation 
of  goods.  Such  an  acceptance  does  not  grow  out  of  a  transaction  in- 
volving the  importation  or  exportation  of  goods,  nor  does  it  grow  out 
of  a  transaction  involving  the  domestic  shipment  or  storage  of  goods. 
(Informal  Ruling  of  the  Board,  December  8,  1916.) 

Substitution  of  Security  fob  Acceptances. — During  the  life  of  an 
acceptance  other  warehouse  receipts  may  be  substituted  for  those 
pledged  as  security  for  the  acceptance.  (Informal  Ruling  of  the 
Board,  Dec.  15,  1916.) 

Demand  and  Sight  Bills. — Demand  and  sight  bills  of  exchange 
must  be  presented  for  payment  by  the  holder  within  a  reasonable 
time.  Demand  and  sight  bills  become  due  and  payable  on  the  date 
on  which  they  are  presented  for  acceptance. 

If  a  member  bank  holds  demand  and  sight  drafts  for  more  than  a 
reasonable  time  after  acceptance,  they  must  be  classed  as  overdue 
paper  and  considered  in  substance  as  promissory  notes  of  the  acceptor 
subject  to  the  limitations  imposed  by  Section  5200.  (Opinion  of  Coun- 
sel of  Board,  Nov.  28,  1916.) 

Draft  Against  Shipment  by  Corporation  to  Agent. — A  member 
bank  may  properly  accept  a  draft  drawn  against  the  shipment  of 
goods  from  a  corporation  to  its  agent  or  branch  even  though  no  sale 
of  the  goods  is  involved  In  the  transaction.  (Informal  Ruling  of 
Board,  Aug.  24,  1917.) 

Warehouse  Acceptances  Covering  Goods  Under  Contract  for  Sale 
and  Delivery  At  a  Remote  Period. — Although  a  National  bank  may 
accept  drafts  drawn  upon  It  having  not  more  than  six  months'  sight 
to  run  which  are  secured  at  the  time  of  acceptance  by  a  warehouse 
receipt  conveying  or  securing  title  covering  readily  marketable  staples, 
nevertheless,  such  an  acceptance  must  not  be  made  subject  to  any 
renewals.     (Opinion  of  Counsel  of  Board,  March,  1920.) 

§  244.  Powers  of  Reserve  Banks — Advances  to  Member  Banks. 

— Any  Federal  reserve  bank  may  make  advances  to  its  member 
banks  on  their  promissory  notes  for  a  period  not  exceeding  fifteen 
days  at  rates  to  be  established  by  such  Federal  reserve  banks,  sub- 
ject to  the  review  and  determination  of  the  Federal  Reserve  Board, 
provided  such  promissory  notes  are  secured  by  such  notes,  drafts, 
bills  of  exchange,  or  bankers'  acceptances  as  are  eligible  for  re- 


260 

discount  or  for  purchase  by  Federal  reserve  banks  under  the  pro- 
visions of  this  Act,  or  by  the  deposit  or  pledge  of  bonds  or  notes 
of  the  United  States.  (Sec.  13,  Act  Dec.  23,  1913,  as  amended 
by  Act  Sept.  7,  1916.) 

Promissory  Notes  of  Member  Banks. — Member  banks  in  procuring 
advances  from  their  Federal  Reserve  Bank  on  their  promissory  note 
must  secure  such  notes  by  paper  eligible  for  rediscount  or  for  pur- 
chase by  Federal  Reserve  Banks  or  by  bonds  or  notes  of  the  United 
States.  County  warrants  are  not  eligible  as  security.  (Opinion  of 
Counsel  of  Board,  Oct.  5,  1916.) 

Advances  to  Member  Banks. — Eligible  paper  pledged  as  security  for 
a  promissory  note  of  a  member  bank  on  which  an  advance  is  being 
made  by  a  Federal  Reserve  Bank  need  not  be  indorsed  by  such  mem- 
ber bank  if  such  eligible  paper  is  already  in  negotiable  form.  (Opinion 
of  Counsel  of  Board,  Oct.  26,  1916.) 

Advances  on  Bonds  or  Notes  of  United  States. — Any  member  bank 
may  procure  advances  from  its  Federal  Reserve  Bank  on  its  own  prom- 
issory note  secured  by  a  deposit  of  or  pledge  of  bonds  or  notes  of  the 
United  States.  (Opinion  of  Counsel  of  Board,  Feb.  16,  1917.)  Farm 
loan  bonds,  however,  are  not  obligations  of  the  United  States  and  are 
not  eligible  as  collateral.     (Opinion  of  Counsel  of  Board,  Nov.  26,  1917.) 

Renewal  of  15-Day  Notes  of  Member  Banks. — A  Federal  Reserve 
Bank  may  properly  renew  the  15-day  notes  of  its  member  banks  if 
properly  secured,  provided  that  the  Federal  Reserve  Bank  does  not 
obligate  itself  in  advance  to  make  any  such  renewal.  (Opinion  of 
Counsel  of  Board,  Sept.  13,  1917.) 

§  245.  Limitation  on  Total  Indebtedness  of  National  Bank — 
Exceptions. — See  §  114,  page  107,  under  Part  I. 

§  246.  Powers  of  Board — Dealings  of  Reserve  Banks  in  Nego- 
tiable Paper.— The  discount  and  rediscount  and  the  purchase  and 
sale  by  any  Federal  reserve  bank  of  any  bills  receivable  and  of 
domestic  and  foreign  bills  of  exchange,  and  of  acceptances  au- 
thorized by  this  Act,  shall  be  subject  to  such  restrictions,  limita- 
tions, and  regulations  as  may  be  imposed  by  the  Federal  Reserve 


261 

Board.     (Sec.  13,  Act  Dec.  23,  1913,  as  amended  by  Act  Sept. 
7,  1916.) 

§  247.  Power  of  National  Banks  as  Insurance  Agents. — See  § 
19,  page  28,  Part  I. 

§  248.  Acceptance  by  Member  Banks  of  Drafts  and  Bills  of 
Exchange  Drawn  to  Furnish  Dollar  Exchange.— Any  member 
bank  may  accept  drafts  or  bills  of  exchange  drawn  upon  it  having 
not  more  than  three  months'  sight  to  run,  exclusive  of  days  of 
grace,  drawn  under  regulations  to  be  prescribed  by  the  Federal 
Reserve  Board  by  banks  or  bankers  in  foreign  countries  or  depend- 
encies or  insular  possessions  of  the  United  States  for  the  purpose 
of  furnishing  dollar  exchange  as  required  by  the  usages  of  trade 
in  the  respective  countries,  dependencies,  or  insular  possessions. 
Such  drafts  or  bills  may  be  acquired  by  Federal  reserve  banks  in 
such  amounts  and  subject  to  such  regulations,  restrictions,  and 
limitations  as  may  be  prescribed  by  the  Federal  Eeserve  Board: 
Provided,  however,  That  no  member  bank  shall  accept  such  drafts 
or  bills  of  exchange  referred  to  [m]  this  paragraph  for  any  one 
bank  to  an  amount  exceeding  in  the  aggregate  ten  per  centum  of 
the  paid-up  and  unimpaired  capital  and  surplus  of  the  accepting 
bank  unless  the  draft  or  bill  of  exchange  is  accompanied  by  docu- 
ments conveying  or  securing  title  or  by  some  other  adequate 
security:  Provided  further,  That  no  member  bank  shall  accept 
such  drafts  or  bills  in  an  amount  exceeding  at  any  time  the  aggre- 
gate of  one-half  of  its  paid-up  and  unimpaired  capital  and  surplus. 
(Sec.  13,  Act  Dec.  23,  1913,  as  amended  by  Act  Sept.  7,  1916.) 


262 

REGULATION"  C  OF  FEDERAL  RESERVE  BOARD,  SERIES 

OF  1917. 

(Superseding  Regulation  C  of  191fi.) 

ACCEPTANCE  BY  MEMBER  BANKS  OF  DRAFTS  AND  BILLS  OF 

EXCHANGE. 

A. 

Acceptance  of  drafts  or  bills  of  exchange  drawn  against  domestic 

or  foreign  shipments  of  goods  or  secured  by  warehouse  receipts 

covering  readily  marketable  staples. 

I.  Statutory  Provisions. 

Under  the  provisions  of  the  fifth  paragraph  of  Section  13  of  the 
Federal  Reserve  Act,  as  amended  by  the  acts  of  September  7,  1916, 
and  June  21,  1917,  any  member  bank  may  accept  drafts  or  bills  of 
exchange  drawn  upon  it,  having  not  more  than  six  months'  sight  to 
run,  exclusive  of  days  of  grace,  which  grow  out  of  transactions  in- 
volving the  importation  or  exportation  of  goods;  or  which  grow  out 
of  transactions  involving  the  domestic  shipment  of  goods,  provided 
shipping  documents  conveying  or  securing  title  are  attached  at  the 
time  of  acceptance;  or  which  are  secured  at  the  time  of  acceptance 
by  a  warehouse  receipt  or  other  such  document  conveying  or  securing 
the  title  covering  readily  marketable  staples.  This  paragraph  limits 
the  amount  which  any  bank  shall  accept  for  any  one  person,  company, 
firm,  or  corporation,  whether  in  a  foreign  or  domestic  transaction,  to 
an  amount  not  exceeding  at  any  time,  in  the  aggregate,  more  than  10 
per  centum  of  its  paid-up  and  unimpaired  capital  stock  and  surplus. 
This  limit,  however,  does  not  apply  in  any  case  where  the  accepting 
bank  is  secured  either  by  attached  documents  or  by  some  other  actual 
security  growing  out  of  the  same  transaction  as  the  acceptance.  The 
law  also  provides  that  any  bank  may  accept  such  bills  up  to  an 
amount  not  exceeding  at  any  time,  in  the  aggregate,  more  than  one- 
half  of  its  paid-up  and  unimpaired  capital  stock  and  surplus;  or,  with 
the  approval  of  the  Federal  Reserve  Board,  up  to  an  amount  not  ex- 
ceeding at  any  time,  in  the  aggregate,  more  than  100  per  centum  of 
its  paid-up  and  unimpaired  capital  stock  and  surplus.  In  no  event, 
however,  shall  the  aggregate  amount  of  acceptances  growing  out  of 
domestic  transactions  exceed  50  per  centum  of  such  capital  stock  and 
surplus. 


263 

II.    Regulations. 

1.  Under  the  provisions  of  the  law  referred  to  above  the  Federal 
Reserve  Board  has  determined  that  any  member  bank,  having  an  un- 
impaired surplus  equal  to  at  least  20  per  centum  of  its  paid-up  capital, 
which  desires  to  accept  drafts  or  bills  of  exchange  drawn  for  the 
purposes  described  above,  up  to  an  amount  not  exceeding  at  any  time, 
in  the  aggregate,  100  per  centum  of  its  paid-up  and  unimpaired  capital 
stock  and  surplus,  may  file  an  application  for  the  purpose  with  the 
Federal  Reserve  Board.  Such  application  must  be  forwarded  through 
the  Federal  Reserve  Bank  of  the  district  in  which  the  applying  bank 
is  located. 

2.  The  Federal  Reserve  Bank  shall  report  to  the  Federal  Reserve 
Board  upon  the  standing  of  the  applying  bank,  stating  whether  the 
business  and  banking  conditions  prevailing  in  its  district  warrant  the 
granting  of  such  applications. 

3.  The  approval  of  any  such  application  may  be  rescinded  upon  90 
days'  notice  to  the  bank  affected. 

B. 

Acceptance  of  drafts  ob  bills  of  exchange  drawn  fob  the  pubpose  of 
cbeatinq  dollab  exchange. 

I.     Statutort  Peovisions. 

Section  13  of  the  Federal  Reserve  Act  also  provides  that  any  mem- 
ber bank  may  accept  drafts  or  bills  of  exchange  drawn  upon  it  having 
not  more  than  three  months'  sight  to  run,  exclusive  of  days  of  grace, 
drawn,  under  regulations  to  be  prescribed  by  the  Federal  Reserve 
Board,  by  banks  or  bankers  in  foreign  countries  or  dependencies  or 
insular  possessions  of  the  United  States  for  the  purpose  of  furnish- 
ing dollar  exchange  as  required  by  the  usages  of  trade  in  the  respec- 
tive countries,  dependencies,  or  insular  possessions. 

No  member  banks  shall  accept  such  drafts  or  bills  of  exchange  for 
any  one  bank  to  an  amount  exceeding  in  the  aggregate  10  per  centum 
of  the  paid-up  and  unimpaired  capital  and  surplus  of  the  accepting 
bank  unless  the  draft  or  bill  of  exchange  is  accompanied  by  documents 
conveying  or  securing  title  or  by  some  other  adequate  security.  No 
member  bank  shall  accept  such  drafts  or  bills  in  an  amount  exceed- 
ing at  any  time  in  the  aggregate  one-half  of  its  paid-up  and  unimpaired 
capital  and  surplus.  This  50  percent  limit  is  separate  and  distinct 
from  and  not  included  in  the  limits  placed  upon  the  acceptance  of 
drafts  and  bills  of  exchange  as  described  under  Section  A  of  this 
regulation. 


264 

II.    Regulations. 

Any  member  bank  desiring  to  accept  drafts  drawn  by  banks  or 
bankers  in  foreign  countries  or  dependencies  or  insular  possessions  of 
the  United  States  for  the  purpose  of  furnishing  dollar  exchange  shall 
first  make  an  application  to  the  Federal  Reserve  Board  setting  forth 
the  usages  of  trade  in  the  respective  countries,  dependencies  or  in- 
sular possessions  in  which  such  banks  or  bankers  are  located. 

If  the  Federal  Reserve  Board  should  determine  that  the  usages  of 
trade  in  such  countries,  dependencies,  or  possessions  require  the 
granting  of  the  acceptance  facilities  applied  for,  it  will  notify  the 
applying  bank  of  its  approval  and  will  also  publish  in  the  Federal 
Reserve  Bulletin  the  name  or  names  of  those  countries,  dependencies, 
or  possessions  in  which  banks  or  bankers  are  authorized  to  draw  on 
member  banks  whose  applications  have  been  approved  for  the  pur- 
pose of  furnishing  dollar  exchange. 

The  Federal  Reserve  Board  reserves  the  right  to  modify  or  on  90 
days'  notice  to  revoke  its  approval  either  as  to  any  particular  member 
bank  or  as  to  any  foreign  country  or  dependency  or  insular  possession 
of  the  United  States  in  which  it  has  authorized  banks  or  bankers  to 
draw  on  member  banks  for  the  purpose  of  furnishing  dollar  exchange. 

Membeb  Bank  Acceptances. — When  a  member  bank  purchases  its 
own  acceptance  before  maturity  such  acceptance  need  not  be  included 
in  the  aggregate  of  acceptances  authorized  by  Setion  13.  (Opinion  of 
Counsel  of  Board,  July  25,  1916.) 

Banker's  "Dollar  Exchange"  Acceptances. — The  50  per  cent,  limit 
imposed  upon  the  amount  of  drafts  which  a  member  bank  may  accept 
for  the  purpose  of  furnishing  dollar  exchange  is  separate  and  distinct 
from  and  not  included  in  the  limits  imposed  by  Section  13  upon  the 
amount  of  drafts  or  bills  of  exchange  drawn  against  the  shipment  of 
goods  or  against  warehouse  receipts  covering  readily  marketable 
staples,  which  a  member  bank  may  accept.  (Opinion  of  Counsel  of 
Board,  June  15,  1917.) 

Bankers'  Acceptances  Without  Documents,  as  "Accommodation." — 
The  acceptance  of  a  draft  by  a  member  bank  against  an  acceptance 
agreement  which  purports  to  assign  to  the  bank  certain  collateral 
security,  but  which  does  not  specifically  mention  any  security  as  as- 
signed, is  an  ordinary  accommodation  acceptance,  and  is  not  authorized 
by  law.     (Opinion  of  Counsel  of  Board,  March  22,  1918.) 

Bankers'  Domestic  Acceptances,  Eligibility  of. — A  draft  drawn  by 
the  purchaser  of  goods  against  a  National  bank  is  not  eligible  for 


265 

acceptance  by  that  bank  under  the  provisions  of  Section  13  of  the 
Federal  Reserve  Act  merely  because  it  is  secured  by  a  bill  of  lading 
covering  the  goods  bought.  (Opinion  of  Counsel  of  Board,  April  21, 
1917.) 

§  249.  Powers  of  Reserve  Banks — Open  Market  Purchases  of 
Bills  of  Exchange,  Trade  Acceptances  and  Bankers'  Acceptances. — 
Any  Federal  reserve  bank  may,  under  rules  and  regulations  pre- 
scribed by  the  Federal  Eeserve  Board,  purchase  and  sell  in  the  open 
market,  at  home  or  abroad,  either  from  or  to  domestic  or  foreign 
banks,  firms,  corporations,  or  individuals,  cable  transfers  and 
bankers'  acceptances  and  bills  of  exchange  of  the  kinds  and  ma- 
turities of  this  Act  made  eligible  for  rediscount,  with  or  without 
the  indorsement  of  a  member  bank.     (Sec.  14,  Act  Dec.  23,  1913.) 

Regulation  B  of  the  Federal  Reserve  Board,  Series  of  1917  (Su- 
perceding Reg.   B  of   1916.)  — 

Open-market  purchases  of  bills  of  exchange,  trade  acceptances,  and 
bankers'  acceptances  under  section  14. 

I.     General  Statutory  Provisions. 

Section  14  of  the  Federal  Reserve  Act  permits  Federal  Reserve 
Banks  under  rules  and  regulations  to  be  prescribed  by  the  Federal 
Reserve  Board  to  purchase  and  sell  in  the  open  market  from  banks, 
firms,  corporations,  or  individuals,  bankers'  acceptances  and  bills  of 
exchange  of  the  kinds  and  maturities  made  eligible  by  the  Act  for 
rediscount,  with  or  without  the  indorsement  of  a  member  bank. 

II.    General  Character  of  Bills  and  Acceptances  Eligible. 

The  Federal  Reserve  Board,  exercising  its  statutory  right  to  regulate 
the  purchase  of  bills  of  exchange  and  acceptances,  has  determined  that 
a  bill  of  exchange  or  acceptance,  to  be  eligible  for  purchase  by  Federal 
Reserve  Banks  under  Section  14 — 

(a)  Must  not  have  been  issued  for  carrying  or  trading  in  stocks, 
bonds,  or  other  investment  securities,  except  bonds  and  notes  of  the 
Government  of  the  United  States. 

(&)  Must  not  be  a  bill  the  proceeds  of  which  have  been  used  or  are 
to  be  used  for  permanent  or  fixed  investments  of  any  kind,  such  as 
land,  buildings,  or  machinery,  or  for  investments  of  a  merely  specula- 
tive character. 


266 

(c)  Must  have  been  accepted  by  the  drawee  prior  to  purchase  by  a 
Federal  Reserve  Bank  unless  It  is  accompanied  and  secured  by  ship- 
ping documents  or  by  a  warehouse,  terminal,  or  other  similar  receipt 
conveying  security  title. 

(d)  May  be  secured  by  the  pledge  of  goods*  or  collateral,  provided 
it  is  otherwise  eligible. 

In  addition  to  the  above  general  requirements,  each  bill  of  exchange 
and  trade  acceptance  purchased  under  the  terms  of  this  regulation 
must  also  conform  to  the  more  specific  requirements  set  forth  under 
III,  and  each  banker's  acceptance  must  also  conform  to  the  more 
specific  requirements  set  forth  under  IV. 

III.    Bills  of  Exchange  and  Trade  Acceptances. 

(a)  Definition. — A  bill  of  exchange,  within  the  meaning  of  this  reg- 
ulation, is  defined  as  an  unconditional  order  in  writing,  addressed  by 
one  person  to  another,  other  than  a  banker  as  defined  under  IV  (a), 
signed  by  the  person  giving  it,  requiring  the  person  to  whom  it  is 
addressed,  to  pay,  In  the  United  States,  at  a  fixed  or  determinable  fu- 
ture-time, a  sum  certain  in  dollars  to  the  order  of  a  specified  person; 
and  a  trade  acceptance  is  defined  as  a  bill  of  exchange  drawn  by  the 
seller  on  the  purchaser  of  goods  sold,  and  accepted  by  such  purchaser. 

(6)  Eligibility. — To  be  eligible  for  purchase  the  bill  must  have 
arisen  out  of  an  actual  commercial  transaction,  domestic  or  foreign; 
that  is,  it  must  be  a  bill  which  has  been  issued  or  drawn  for  agri- 
cultural, industrial,  or  commercial  purposes  or  the  proceeds  of  which 
have  been  used  or  are  to  be  used  for  the  purpose  of  producing,  pur- 
chasing, carrying  or  marketing  goods  in  one  or  more  of  the  steps 
of  the  process  of  production,  manufacture,  or  distribution.  It  must 
have  a  maturity  at  time  of  purchase  of  not  more  than  ninety  days, 
exclusive  of  days  of  grace. 

(c)  Evidence  of  eligibility. — A  Federal  Reserve  Bank  shall  take  such 
steps  as  it  deems  necessary  to  satisfy  itself  as  to  the  eligibility  of  the 
bill  offered  for  purchase,  unless  it  presents  prima  facie  evidence  thereof 
or  bears  a  stamp  or  certificate  affixed  by  the  acceptor  or  drawer  show- 
ing that  it  is  a  trade  acceptance. 

(d)  Statements. — Unless  indorsed  by  a  member  bank,  a  bill  is  not 
eligible  for  purchase  until  a  satisfactory  statement  has  been  fur- 
nished of  the  financial  condition  of  one  or  more  of  the  parties  thereto. 

♦When  used  in  this  regulation  the  word  "goods"  shall  be  construed 
to  include  goods,  wares,  merchandise,  or  agricultural  products,  in- 
cluding live  stock. 


267 

IV.    Bankers'  Acceptance. 

(a)  Definition. — A  banker's  acceptance,  within  the  meaning  of  this 
regulation,  is  a  bill  of  exchange  of  which  the  acceptor  is  a  bank  or 
trust  company,  or  a  firm,  person,  company,  or  corporation  engaged  in 
the  business  of  granting  bankers'  acceptance  credits. 

(b)  Eligibility. — To  be  eligible  for  purchase,  the  bill  which  must 
have  a  maturity  at  time  of  purchase  of  not  more  than  three  months, 
exclusive  of  days  of  grace,  must  have  been  drawn  under  a  credit 
opened  for  the  purpose  of  conducting,  or  settling  accounts  resulting 
from,  a  transaction  or  transactions  innvolving — 

(1)  The   shipment   of  goods   between   the   United    States   and   any 

foreign  country,  or  between  the  United  States  and  any  of  its 
dependencies  or  insular  possessions,  or  between  foreign  coun- 
tries, or 

(2)  The  shipment  of  goods  within  the  United  States,  provided  the 

bill  at  the  time  of  its  acceptance  is  accompanied  by  shipping 
documents,  or 

(3)  The   storage   within   the   United    States   of   readily   marketable 

goods,  provided  the  acceptor  of  the  bill  is  secured  by  ware- 
house, terminal,  or  other  similar  receipt,  or 

(4)  The  storage  within  the  United  States  of  goods  which  have  been 

actually  sold,  provided  the  acceptor  of  the  bill  is  secured  by 

the  pledge  of  such  goods; 
or  it  must  be  a  bill  drawn  by  a  bank  or  banker  in  a  foreign  country 
or  dependency  or  insular  possession  of  the  United  States  for  the  pur- 
pose of  furnishing  dollar  exchange.  In  this  latter  case  the  bank  or 
banker  drawing  the  bill  must  be  in  a  country,  dependency,  or  posses- 
sion whose  usages  of  trade  have  been  determined  by  the  Federal  Re- 
serve Board  to  require  the  drawing  of  bills  of  this  character. 

(c)  Evidence  of  eligibility. — A  Federal  Reserve  Bank  must  be  satis- 
fied either  by  reference  to  the  acceptance  itself,  or  otherwise,  that  it 
is  eligible  for,  purchase.  Satisfactory  evidence  of  eligibility  may  con- 
sist of  a  stamp  or  certificate  affixed  by  the  acceptor,  in  form  satis- 
factory to  the  Federal  Reserve  Bank.  No  evidence  of  eligibility  is 
required  with  respect  to  a  bill  accepted  by  a  National  bank. 

(d)  Statements. — Bankers'  acceptances,  other  than  those  accepted 
or  indorsed  by  member  banks,  shall  be  eligible  for  purchase  only  after 
the  acceptor  has  furnished  a  satisfactory  statement  of  financial  condi- 
tion in  form  to'  be  approved  by  the  Federal  Reserve  Board  and  has 
agreed  in  writing  with  a  Federal  Reserve  Bank  to  inform  it  upon  re- 
quest concerning  the  transactions  underlying  such  acceptances. 

Banker's  Acceptance  Secured  by  Bti.l  or  Sale. — A  banker's  accept- 
ance drawn   for  the   purpose  of  purchasing  goods  secured   by  a  bill 


268 

of  sale  of  stock  in  hand  is  not  eligible  for  purchase  by  Federal  Reserve 
Banks  under  the  provisions  of  Regulation  B.  (Opinion  of  Counsel  of 
Board,  Nov.  4,  1916.) 

Acceptance  by  Drawee. — A  draft  to  be  eligible  as  an  acceptance 
must  be  accepted  by  the  drawee  and  not  by  any  one  else.  A  draft 
drawn  by  a  corporation  can  not  be  purchased  by  a  Federal  Reserve 
Bank  in  the  open  market  as  a  banker's  acceptance.  For  the  same 
reason  such  a  draft  is  ineligible  as  a  trade  acceptance.  (Informal 
Ruling  of  Board,  Feb.  1,  1916.) 

Single  Name  Paper. — Any  Federal  Reserve  Bank  may,  under  the 
provisions  of  Section  14  of  the  Federal  Reserve  Act,  purchase  accept- 
ances and  bills  of  exchange  of  certain  kinds  and  maturities  in  the 
open  market,  but  promissory  notes  as  distinguished  from  bills  of  ex- 
change, whether  one  or  more  names,  are  not  eligible  for  such  pur- 
chase.    (Opinion  of  Counsel  of  Board,  Oct.  8,  1915.) 

Bill  of  Exchange  Drawn  by  the  Drawee. — An  instrument  in  the 
form  of  a  bill  of  exchange,  drawn  by  an  agent  of  a  corporation  upon 
the  corporation  itself,  is  not  a  bill  of]  exchange  such  as  is  eligible  for 
purchase  in  the  open  market  by  Federal  Reserve  Banks.  (Opinion  of 
Counsel  of  Board,  Aug.  2,  19ft.) 

Purchase  of  Acceptances  by  Branch  of  Reserve  Bank. — The  Board 
has  no  objections  to  the  purchase  of  acceptances  by  a  branch  of  a  re- 
serve bank  under  the  authorization  of  the  reserve  bank.  (Informal 
Ruling  of  Board,  Nov.  23,  1916.) 

Indorsement  on  Bill  of  Exchange. — An  indorsement  on  a  bill  of 
exchange  which  expressly  exempts  the  indorser  from  any  responsibility 
for  the  validity  or  genuiness  of  an  accompanying  bill  of  lading  or 
other  paper  or  for  the  quality,  quantity,  or  delivery  of  goods  covered 
thereby,  does  not  render  the  bill  non-negotiable  or  ineligible  for  pur- 
chase by  a  Federal  Reserve  Bank.  (Informal  Ruling  of  Board,  May 
16,  1917.) 

§  250.  Powers  of  Reserve  Banks — Gold  Coin  and  Bullion  in 
Open  Market. —  Every  Federal  reserve  bank  shall  have  power: 

(a)  To  deal  in  gold  coin  and  bullion  at  home  or  abroad,  to  make 
loans  thereon,  exchange  Federal  reserve  notes  for  gold,  gold  coin, 
or  gold  certificates,  and  to  contract  for  loans  of  gold  coin  or  bul- 
lion, giving  therefor,  when  necessary,  acceptable  security,  including 


269 

the  hypothecation  of  United  States  bonds  or  other  securities  which 
Federal  reserve  banks  are  authorized  to  hold.  (Sec.  14,  Act  Dec. 
23,  1913.) 

§  251.  Powers  of  Keserve  Banks — Notes,  Bonds,  and  Warrants 
in  Open  Market. —  (b)  To  buy  and  sell,  at  home  or  abroad,  bonds 
and  notes  of  the  United  States,  and  bills,  notes,  revenue  bonds,  and 
warrants  with  a  maturity  from  date  of  purchase  of  not  exceeding 
six  months,  issued  in  anticipation  of  the  collection  of  taxes  or  in 
anticipation  of  the  receipt  of  assured  revenues  by  any  State,  county, 
district,  political  subdivision,  or  municipality  in  the  continental 
United  States,  including  irrigation,  drainage  and  reclamation  dis- 
tricts, such  purchases  to  be  made  in  accordance  with  rules  and 
regulations  prescribed  by  the  Federal  Reserve  Board.  (Sec.  14, 
Act  Dec.  23,  1913.) 

Regulation  E  of  Federal  Reserve  Board,  Series  of  1917  (Super- 
ceding Reg.  E  of  1916). — 

Purchase  of  Warrants. — The  statutory  provisions  are  omitted  to 
prevent  repetition. 

For  brevity's  sake,  the  term  "warrant"  when  used  in  this  regulation 
shall  be  construed  to  mean  "bills,  notes,  revenue  bonds,  and  warrants 
with  a  maturity  from  date  of  purchase  of  not  exceeding  six  months," 
and  term  "municipality"  shall  be  construed  to  mean  "State,  county, 
district,  political  subdivision,  or  municipality  in  the  continental  United 
States,  including  irrigation,  drainage,  and  reclamation  districts." 

Regulation. 

1.  Any  Federal  Reserve  Bank  may  purchase  warrants  issued  by  a 
municipality  in  anticipation  of  the  collection  of  taxes  or  in  anticipa- 
tion of  the  receipt  of  assured  revenues,  provided — 

(a)  They  are  the  general  obligations  of  the  entire  municipality;  it 
being  intended  to  exclude  as  ineligible  for  purchase  all  such 
obligations  as  are  payable  from  "local  benefit"  and  "special 
assessment"  taxes  when  the  municipality  at  large  is  not  di- 
rectly or  ultimately  liable: 
(&)  They  are  issued  in  anticipation  of  taxes  or  revenues  which  are 
due  and  payable  on  or  before  the  date  of  maturity  of  such 
warrants;  but  the  Federal  Reserve  Board  may  waive  this  con- 


270 

dition  in  specific  cases.     For  the  purposes  of  this  regulation 
taxes  shall  be  considered  as  due  and  payable  on  the  last  day 
on  which  they  may  be  paid  without  penalty; 
(c)   They  are  issued  by  a  municipality — 

(1)  Which  has  been  in  existence*  for  a  period  of  ten  years; 

(2)  Which  for  a  period  of  10  years  previous  to  the  purchase  has 

not  defaulted*  for  longer  than  15  days  in  the  payment  of 
any  part  of  either  principal  or  interest  of  any  funded 
debt  authorized  to  be  contracted  by  it. 

(3)  Whose  net  funded  indebtedness*   does  not  exceed  10  per 

centum  of  the  valuation  of  its  taxable  property,  to  be 
ascertained  by  the  last  preceding  valuation  of  property 
for  the  assessment  of  taxes. 

II.  Except  with  the  approval  of  the  Federal  Reserve  Board,  no 
Federal  Reserve  Bank  shall  purchase  and  hold  an  amount  in  excess 
of  25  per  centum  of  the  total  amount  of  warrants  outstanding  at  any 
time  and  issued  in  conformity  with  provisions  of  Section  14  (b)  above 
quoted,  and  actually  sold  by  a  municipality. 

III.  Except  with  the  approval  of  the  Federal  Reserve  Board,  the 
aggregate  amount  invested  by  any  Federal  Reserve  Bank  in  warrants 
of  all  kinds  shall  not  exceed  at  the  time  of  purchase  a  sum  equal  to 
10  per  centum  of  the  deposits  kept  by  its  member  banks  with  such 
Federal  Reserve  Bank. 

IV.  Except  with  the  approval  of  the  Federal  Reserve  Board,  the 
maximum  amount  which  may  be  invested  at  the  time  of  purchase 
by  any  Federal  Reserve  Bank  In  warrants  of  any  single  municipality 
shall  be  limited  to  the  following  percentages  of  the  deposits  kept  in 
such  Federal  Reserve  Bank  by  its  member  banks: 

Five  per  centum  of  such  deposits  in  warrants  of  a  municipality 

of  50,000  population  or  over. 
Three  per  centum  of  such  deposits  in  warrants  of  a  municipality 

of  over  30,000  population,  but  less  than  50,000. 
,One  per  centum  of  such  deposits  in  warrants  of  a  municipality  of 

over  10,000  population,  but  less  than  30,000. 

V.  Warrants  of  a  municipality  of  10,000  population  or  less  shall  be 
purchased  only  with  the  special  approval  of  the  Board. 

The  population  of  a  municipality  shall  be  determined  by  the  last 
Federal  or  State  census.  Where  it  can  not  be  exactly  determined  the 
board  will  make  special  rulings. 

VI.  Opinion  of  recognized  counsel  on  municipal  issues  or  of  the 
regularly  appointed  counsel  of  the  municipality  as  to  the  lagality  of 
the  issue  shall  be  secured  and  approved  in  each  case  by  counsel  for 
the  Federal  Reserve  Bank. 

*See  appendix  to  Regulation  E. 


271 

VII.  Any  Federal  Reserve  Bank  may  purchase  from  any  of  Its  mem- 
ber banks  warrants  of  any  municipality,  indorsed  by  such  member 
bank,  with  waiver  of  demand,  notice,  and  protest,  up  to  an  amount 
not  to  exceed  10  per  centum  of  the  aggregate  capital  and  surplus  of 
such  member  bank:  Provided,  however,  That  such  warrants  comply 
with  provisions  I  and  III  of  these  regulations,  except  that  where  a 
period  of  10  years  is  mentioned  in  I  (c)  hereof  a  period  of  5  years 
shall  be  substituted  for  the  purposes  of  this  clause. 

Appendix  to  Regulation  E. 

"Net  Funded  Indebtedness." — The  term  "net  funded  indebtedness" 
is  hereby  defined  to  mean  the  legal  gross  indebtedness  of  the  munici- 
pality (including  the  amount  of  any  school  district  or  other  bonds 
which  depend  for  their  redemption  upon  taxes  levied  upon  property 
within  the  municipality)  less  the  aggregate  of  the  following  items: 

(1)  The  amount  of  outstanding  bonds  or  other   debt  obligations 

made  payable  from  current  revenues; 

(2)  The  amount  of  outstanding  bonds  issued  for  the  purpose  of 

providing  the  inhabitants  of  a  municipality  with  public  utili- 
ties, such  as  waterworks,  docks,  electric  plants,  transporta- 
tion facilities,  etc.:  Provided,  that  evidence  is  submitted 
showing  that  the  income  from  such  utilities  is  sufficient  for 
maintenance,  for  payment  of  interest  on  such  bonds,  and  for 
the  accumulation  of  a  sinking  fund  for  their  redemption; 

(3)  The  amount  of  outstanding  improvement  bonds,  issued  under 

laws   which   provide   for  the  levying  of  special   assessments 
„  against  abutting  property  in  amounts  sufficient  to  insure  the 

payment  of  interest  on  the  bonds  and  the  redemption  thereof: 
Provided,  That  such  bonds  are  direct  obligations  of  the  mu- 
nicipality and  included  In  the  gross  indebtedness  of  the 
municipality; 

(4)  The  total  of  all  sinking  funds  accumulated  for  the  redemption 

of  the  gross  indebtedness  of  the  municipality,  except  sinking 
funds  applicable  to  bonds  just  described  in  (1),  (2),  and  (3) 
above. 

"existence"  and  "nondefault." 

Warrants  will  be  construed  to  comply  with  that  part  of  I  (c)  of 
Regulation  E  relative  to  term  of  existence  and  nondefault,  under  the 
following  conditions: 

(1)  Warrants  issued  by  or  in  behalf  of  any  municipality  which 
was,  subsequent  to  the  issuance  of  such  warrants,  consolidated  with 
or  merged  into  an  existing  political  division  which  meets  the  re- 
quirements of  these  regulations,  will  be  deemed  to  be  the  warrants 


272 

of  such  political  division:  Provided  that  such  warrants  were  assumed 
by  such  political  division  under  statutes  and  appropriate  proceedings 
the  effect  of  which  is  to  make  such  warrants  general  obligations  of 
such  assuming  political  division  and  payable,  either  directly  or  ul- 
timately, without  limitation  to  a  special  fund  from  the  proceeds  of 
taxes  levied  upon  all  the  taxable  real  and  personal  property  within 
its  territorial  limits. 

(2)  Warrants  issued  by  or  in  behalf  of  any  municipality  which  was, 
subsequent  to  the  issuance  of  such  warrants,  wholly  succeeded  by  a 
newly  organized  political  division  whose  term  of  existence,  added  to 
that  of  such  original  political  division  or  of  any  other  political  di- 
vision so  succeeded,  is  equal  to  a  period  of  10  years  will  be  deemed  to 
be  warrants  of  such  succeeding  political  division:  Provided,  That  dur- 
ing such  period  none  of  such  political  divisions  shall  have  defaulted 
for  a  period  exceeding  15  days  in  the  payment  of  any  part  of  either 
principal  or  interest  of  any  funded  debt  authorized  to  be  contracted 
by  it:  And  provided  further,  That  such  warrants  were  assumed  by 
such  new  political  division  under  statutes  and  appropriate  proceedings 
the  effect  of  which  is  to  make  such  warrants  general  obligations  of 
such  assuming  political  division  and  payable,  either  directly  or  ulti- 
mately, without  limitation  to  a  special  fund  from  the  proceeds  of 
taxes  levied  upon  all  the  taxable  real  and  personal  property  within 
its  territorial  limits. 

(3)  Warrants  issued  by  or  in  behalf  of  any  municipality  which, 
prior  to  such  issuance,  became  the  successor  of  one  or  more,  or  was 
formed  by  the  consolidation  or  merger  of  two  or  more,  pre-existing 
political  divisions,  the  term  of  existence  of  one  or  more  of  which, 
added  to  that  of  such  succeeding  or  consolidated  political  division, 
is  equal  to  a  period  of  10  years,  will  be  deemed  to  be  warrants  of  a 
political  division  which  has  been  in  existence  for  a  period  of  10 
years:  Provided,  that  during  such  period  none  of  such  original,  suc- 
ceeding, or  consolidated  political  divisions  shall  have  defaulted  for 
a  period  exceeding  15  days  in  the  payment  of  any  part  of  either 
principal  or  interest  of  any  funded  debt  authorized  to  be  contracted 
by  it. 

Maturity  of  Bonds. — That  part  of  Section  14,  which  provides  that 
"revenue  bonds  *  *  *  with  a  maturity  from  date  of  purchase 
of  not  exceeding  six  months"  may  be  purchased,  contemplates  that 
such  bonds  might  at  the  date  of  issue  have  a  maturity  of  longer 
than  six  months.  Bonds  are  eligible  for  purchase  under  this  sec- 
tion if,  at  the  time  of  issue,  provision  is  made  for  the  establishment 
of  a  redemption  fund  which  will  be  sufficient  and  available  for  the 
payment  of  the  bonds  at  maturity,  provided,  of  course,  that  at  the 


273 

time  of  purchase  the  bonds  have  not  more  than  six  months  to  run. 
(Opinion  of  Counsel  of  Board,  Feb.  9,  1915.) 

Warrants  Issued  in  Anticipation  of  Assured  Revenue. — 'Federal 
Reserve  Banks  may,  under  the  provisions  of  Section  14  of  the  Federal 
Reserve  Act,  purchase  warrants  issued  in  anticipation  of  the  receipt 
of  "assured  revenues."  The  term  "revenue"  as  applied  to  the  income 
of  a  State  or  other  political  unit,  does  not  include  the  proceeds  of  a 
sale  of  public  securities.  Warrants  which  are  issued  in  anticipation  of 
the  receipt  of  the  proceeds  of  municipal  bonds  are  not,  therefore, 
eligible  for  purchase  under  the  provisions  of  this  section.  (Opinion 
of  Counsel  of  Board,  March  7,  1916.) 

Eligibility  of  Warrants. — The  Federal  Reserve  Board  may,  under 
the  provisions  of  Regulation  E,  authorize  Federal  Reserve  Banks  to 
purchase  warrants  which  are  issued  in  anticipation  of  the  collection 
of  taxes  and  which  mature  after  the  date  on  which1  such  taxes  are 
due  but  before  the  penalty  attaches  for  their  nonpayment,  if  experi- 
ence has  demonstrated  that  the  due  date  produces  sufficient  taxes  to 
pay  the  warrants  at  maturity.  (Opinion  of  Counsel  of  Board,  Dec. 
4,  1916.) 

Purchase  of  Warrants. — Federal  Reserve  Banks  should  not  buy 
non-negotiable  warrants.  (Informal  Ruling  of  Board,  February  13, 
1917.)  Warrants  should  only  be  purchased  by  Federal  Reserve  Banks 
during  periods  of  great  ease  of  money  and  when  rediscounts  from 
member  banks  and  offers  of  bankers'  acceptances  are  not  heavy.  (In- 
formal Ruling  of  Board,  February  20,  1917.) 

§  252.  Powers  of  Reserve  Banks — Bills  of  Exchange  in  Open 
Market. — (c)  To  purchase  from  member  banks  f.nd  to  sell,  with  or 
without  its  indorsement,  bills  of  exchange  arising  out  of  com- 
mercial transactions,  as  hereinbefore  defined.  (Sec.  14,  Act  Dec. 
23,  1913.) 

Noxmeaiber  Trust  Company  Acceptances. — Acceptances  drawn  by  a 
manufacturer  on  and  accepted  by  a  trust  company  not  a  member  of 
the  Federal  Reserve  System,  the  proceeds  of  which  are  to  be  used  for 
purchases  of  raw  material  and  payment  for  labor  where  the  goods 
had  not  been  sold  and  no  warehouse  receipts  or  other  instruments 
could  be  furnished,  are  held  not  to  be  eligible  for  purchase  by  a 
Federal  Reserve  Bank.  (Informal  Ruling  of  Board,  Jan.  8,  1916.) 
18 


274 

§  253.  Powers  of  Reserve  Banks — Rates  of  Discount  — (d)  To 
establish  from  time  to  time,  subject  to  review  and  determination 
of  the  Federal  Reserve  Board,  rates  of  discount  to  be  charged  by 
the  Federal  reserve  bank  for  each  class  of  paper,  which  shall  be 
fixed  with  a  view  of  accommodating  commerce  and  business  and 
which,  subject  to  the  approval,  review,  and  determination  of  the 
Federal  Reserve  Board,  may  be  graduated  or  progressed  on  the 
basis  of  the  amount  of  the  advances  and  discount  accomodations 
extended  by  the  Federal  reserve  bank  to  the  borrowing  bank.  (Sec. 
14,  Act  Dec.  23,  1913,  as  amended  by  Act  April  13,  1920. 

Federal  Reserve  Bank  Discount  Rates. — Congress  not  only  has  the 
[power  to  prescribe  rates  of  discount  for  Federal  Reserve  Banks,  which 
rates  may  exceed  the  statutory  rates  fixed  by  the  States  in  which  such 
Federal  Reserve  Banks  are  located,  but  it  may  also  delegate  this  power 
to  the  Federal  Reserve  Board,  or  to  the  Federal  Reserve  Banks,  sub- 
ject to  the  approval  of  such  Board.  (Opinion  of  Counsel  of  Board, 
Nov.  19,  1914.) 

Forward  Discount  Rates. — Federal  Reserve  Banks  may,  under  the 
established  right  to  fix  discount  rates  for  acceptances  or  other  eligible 
paper,  fix  a  forward  rate;  that  is,  a  rate  to  apply  at  a  future  time. 
Such  a  rate  is  calculated  to  accommodate  trade  and  commerce  as  re- 
quired by  the  Act,  and  will  tend  to  obviate  speculation  due  to  fluc- 
tuating rates.     (Opinion  of  Counsel  of  Board,  May  18,  1915.) 

Discount  Rates. — The  rate  of  discount  charged  by  a  Federal  Reserve 
Bank  should  be  based  upon  the  maturity  of  the  instrument  discounted 
at  the  time  it  is  discounted  and  not  upon  a  collateral  agreement  by 
which  the  member  bank  binds  itself  to  repurchase  before  maturity. 
(Opinion  of  Counsel  of  Board,  July  31,  1916.) 

Preferential  Rates  of  Discount  on  Membee  Bank  Notes. — The 
Federal  Reserve  Board  may,  under  the  terms  of  Section  14  of  the 
Federal  Reserve  Act,  approve  a  preferential  rate  of  discount  upon 
member  bank  notes  secured  by  certificates  of  indebtedness  of  the 
United  States,  by  Liberty  bonds,  or  by  Victory  notes.  (Opinion  of 
Counsel  of  Board,  Feb.,  1920.) 

§  254.  Powers  of  Reserve  Banks — Foreign  Accounts,  Agencies 
and  Correspondents. —  (e)  To  establish  accounts  with  other  Fed- 
eral reserve  banks  for  exchange  purposes  and,  with  the  consent 


275 

or  upon  the  order  and  direction  of  the  Federal  Reserve  Board  and 
under  regulations  to  be  prescribed  by  said  board,  to  open  and 
maintain  accounts  in  foreign  countries,  appoint  correspondents, 
and  establish  agencies  in  such  countries,  whersoever  it  may  be 
deemed  best  for  the  purpose  of  purchasing,  selling,  and  collecting 
bills  of  exchange,  and  to  buy  and  sell,  with  or  without  its  indorse- 
ment, through  such  correspondents  or  agencies,  bills  of  exchange 
(or  acceptances)  arising  out  of  actual  commercial  transactions 
which  have  not  more  than  ninety  days  to  run,  exclusive  of  days  of 
grace,  and  which  bear  the  signature  of  two  or  more  responsible 
parties,  and,  with  the  consent  of  the  Federal  Eeserve  Board,  to 
open  and  maintain  banking  accounts  for  such  foreign  corres- 
pondents or  agencies.  Whenever  any  such  account  has  been 
opened  or  agency  or  correspondent  has  been  appointed  by  a  Fed- 
eral reserve  bank,  with  the  consent  of  or  under  the  order  and 
direction  of  the  Federal  Reserve  Board,  any  other  Federal  re- 
serve bank  may,  with  the  consent  and  approval  of  the  Federal 
Reserve  Board  be  permitted  to  carry  on  or  conduct,  through  the 
Federal  reserve  bank  opening  such  account  or  appointing  such 
agency  or  correspondent,  any  transaction  authorized  by  this  sec- 
tion under  rules  and  regulations  to  be  prescribed  by  the  board. 
(Sec.  14,  Act  Dec.  23,  1913,  as  amended  by  Act  Sept.  7,  1916,  and 
further  by  Sec.  6,  Act  June  21,  1917;  40  Stat.  L.,  235.) 

Foreign  Agents. — The  Federal  Reserve  Board  has  authorized  the 
Federal  Reserve  Bank  of  New  York  to  open  and  maintain  banking 
accounts  with  and  for  the  following: 

Bank    of   England,    London,   Eng.      Sveriges     Riksbank,      Stockholm, 

Sweden. 

Bank  of  France,  Faris,  France.  Norges    Bank,    Christiania,    Nor- 

way. 

Philippine  Nat.  Bank,  Manila,  P.  I.  De  Nederlandsche  Bank,  Amster- 
dam, Holland. 

Bank  of  Italy,  Rome,  Italy.  Banque    Nationale     de     Belgique, 

Brussels,  Belgium. 

Bank  of  Japan,  Tokio,  Japan.  Bank  of  Spain,  Madrid,  Spain. 

§  255.  Government  Deposits  in  Reserve  Banks. — The  moneys 
held  in  the  general   fund  of  the  Treasury,   except  the  five  per 


27G 

centum  fund  for  the  redemption  of  outstanding  National  bank 
notes  and  the  funds  provided  in  this  Act  for  the  redemption  of 
Federal  reserve  notes  may,  upon  the  direction  of  the  Secretary  of 
the  Treasury,  be  deposited  in  Federal  reserve  banks,  which  banks, 
when  required  by  the  Secretary  of  the  Treasury,  shall  act  as  fiscal 
agents  of  the  United  States;  and  the  revenues  of  the  Government 
or  any  part  thereof  may  be  deposited  in  such  banks,  and  disburse- 
ments may  be  made  by  checks  drawn  against  such  deposits. 

No  public  funds  of  the  Philippine  Islands,  or  of  the  postal  sav- 
ings, or  any  Government  funds,  shall  be  deposited  in  the  conti- 
nental United  States  in  any  bank  not  belonging  to  the  system  es- 
tablished by  this  Act:  Provided,  however,  That  nothing  in  this 
Act  shall  be  construed  to  deny  the  right  of  the  Secretary  of  the 
Treasury  to  use  member  banks  as  depositories.  (Sec.  15,  Act 
Dec.  23,  1913.) 

Government  Depositories. — There  is  nothing  in  the  Federal  Reserve 
Act  which  authorizes  the  Secretary  of  the  Treasury  to  use  State  banks 
which  have  become  member  banks  as  depositories  for  public  moneys 
generally,  though  they  may  be  made  depositories  for  postal  savings 
funds. — (Opinion  of  Counsel  of  Board,  July  8,  1915.) , 

Deposit  of  Postal  Funds  in  Nonmembeb  Banks. — Section  15  of  the 
Federal  Reserve  Act,  which  prohibits  the  deposit  of  any  Government 
funds  in  nonmember  banks,  operates  as  a  repeal  of  so  much  of  Section 
3847,  United  States  Revised  Statutes,  as  amended  by  the  act  of  May 
27,  1908,  as  authorizes  postmasters  to  deposit  public  moneys  in  State 
as  well  as  National  banks.  By  an  act  approved  May  18,  1916,  postal 
saving  deposits  may,  under  certain  conditions,  be  deposited  in  non- 
member  banks.     (Opinion  of  Counsel  of  Board,  June  5,  1916.) 

On  Nov.  23,  1915,  the  Secretary  of  the  Treasury  appointed  the  twelve 
Federal  Reserve  Banks  depositories  and  fiscal  agents  of  the  Govern- 
ment, to  act  as  such  on  and  after  January  1,  1916. 

§  256.  Federal  Reserve  Notes. — Federal  reserve  notes,  to  be  is- 
sued at  the  discretion  of  the  Federal  Eeserve  Board  for  the  purpose 
of  making  advances  to  Federal  reserve  banks  through  the  Federal 
reserve  agents  as  hereinafter  set  forth  and  for  no  other  purpose, 
are  hereby  authorized.  The  said  notes  shall  be  obligations  of  the 
United  States  and  shall  be  receivable  by  all  National  and  member 


277 

banks  and  Federal  reserve  banks  and  for  all  taxes,  customs,  and 
other  public  dues.  They  shall  be  redeemed  in  gold  on  demand  at 
the  Treasury  Department  of  the  United  States,  in  the  city  of 
Washington,  District  of  Columbia,  or  in  gold  or  lawful  money  at 
any  Federal  reserve  bank.     (Sec.  16,  Act  Dec.  23,  1913.) 

Federal  Reserve  Notes  and  Federal  Reserve  Bank  Notes. — Federal 
Reserve  Bank  notes  are  obligations  of  Federal  Reserve  Banks  and 
secured  by  United  States  bonds.  Federal  reserve  notes  are  obligations 
of  the  United  States.  No  reserve  need  be  maintained  against  Federal 
reserve  bank  notes  except  the  5  per  cent,  redemption  fund  with  the 
Treasurer  of  the  United  States.  Federal  reserve  notes,  however,  are 
subject  to  reserves  of  not  less  than  40  per  cent.,  in  which  the  5  per 
cent,  redemption  fund  is  counted  as  a  part.  Federal  Reserve  Bank 
notes  bear  the  words  "national  currency"  and  "Federal  Reserve  Bank 
note."  Federal  reserve  notes  bear  the  words  "Federal  Reserve  note." 
(Informal  Ruling  of  Board,  May  12,  1916.) 

§  257.  Collateral  Security  for  Federal  Reserve  Notes. —  Any 
Federal  reserve  bank  may  make  application  to  the  local  Fed- 
eral reserve  agent  for  such  amount  of  the  Federal  reserve  notes 
hereinbefore  provided  for  as  it  may  require.  Such  application 
shall  be  accompanied  with  a  tender  to  the  local  Federal  reserve 
agent  of  collateral  in  amount  equal  to  the  sum  of  the  Federal 
reserve  notes  thus  applied  for  and  issued  pursuant  to  such  ap- 
plication. The  collateral  security  thus  offered  shall  be  notes, 
drafts,  bills  of  exchange,  or  acceptances  acquired  under  the  pro- 
visions of  section  thirteen  of  this  Act,  or  bills  of  exchange  in- 
dorsed by  a  member  bank  of  any  Federal  reserve  district  and 
purchased  under  the  provisions  of  section  fourteen  of  this  Act, 
or  bankers'  acceptances  purchased  under  the  provisions  of  said 
section  fourteen,  or  gold  or  gold  certificates ;  but  in  no  event  shall 
such  collateral  security,  whether  gold,  gold  certificates,  or  eligible 
paper,  be  less  than  the  amount  of  Federal  reserve  notes  applied 
for.  The  Federal  reserve  agent  shall  each  day  notify  the  Fed- 
eral Eeserve  Board  of  all  issues  and  withdrawals  of  Federal  re- 
serve notes  to  and  by  the  Federal  reserve  bank  to  which  he  is 
accredited.  The  said  Federal  Reserve  Board  may  at  any  time 
call  upon  a  Federal  reserve  bank  for  additional  security  to  protect 


278 

the  Federal  reserve  notes  issued  to  it.  (Sec.  1G,  Act  Dec.  23,  1913, 
as  amended  by  Act  Sept.  7,  1916,  and  further  by  Sec.  7,  Act  June 
21,  1917;  40  Stat.  L.,  236.) 

Pledges  of  Collateral  Security. — Rediscounts  held  by  the  Federal 
Reserve  Agent  as  security  for  Federal  reserve  notes,  and  gold  order 
certificates  deposited  with  a  Federal  Reserve  Agent  for  the  purpose  of 
reducing  the  liability  of  a  Federal  Reserve  Eank  for  its  outstanding 
Federal  reserve  notes,  must  be  so  indorsed  as  to  enable  such  agent 
to  realize  on  such  securities  or  to  convert  such  certificates  into  gold 
if  necessary.     (Opinion  of  Counsel  of  Board,  June  28,  1915.) 

Government  Obligations — Notes  and  Bills  Drawn  for  Trading  in.— 
Notes,  drafts,  and  bills  of  exchange  drawn  for  the  purpose  of  carrying 
or  trading  in  bonds  or  notes  of  the  United  States  and  rediscounted 
under  the  provisions  of  Section  13  are  eligible  as  collateral  security 
for  the  issue  of  Federal  Reserve  notes.  (Opinion  of  Counsel  of  Board, 
May  31,  1917.) 

§  258.  Federal  Reserve  Notes — Reserve  Against,  Issue,  Ex- 
change and  Redemption. — -Every  Federal  reserve  bank  shall  main- 
tain reserves  in  gold  or  lawful  money  of  not  less  than  thirty-five 
per  centum  against  its  deposits  and  reserves  in  gold  of  not  less 
than  forty  per  centum  against  its  Federal  reserve  notes  in  actual 
circulation:  Provided,  hoivever,  That  when  the  Federal  reserve 
agent  holds  gold  or  gold  certificates  as  collateral  for  Federal  re- 
serve notes  issued  to  the  bank  such  gold  or  gold  certificates  shall 
be  counted  as  part  of  the  gold  reserve  which  such  bank  is  required 
to  maintain  against  its  Federal  reserve  notes  in  actual  circulation. 
Notes  so  paid  out  shall  bear  upon  their  faces  a  distinctive  letter  and 
serial  number  which  shall  be  assigned  by  the  Federal  Reserve 
Board  to  each  Federal  reserve  bank.  Whenever  Federal  reserve 
notes  issued  through  one  Federal  reserve  bank  shall  be  received 
by  another  Federal  reserve  bank,  they  shall  be  promptly  re- 
turned for  credit  or  redemption  to  the  Federal  reserve  bank 
through  winch  they  were  originally  issued  or,  upon  direction  of 
such  Federal  reserve  bank,  they  shall  be  forwarded  direct  to  the 
Treasurer  of  the  United  States  to  be  retired.  No  Federal  re- 
serve bank  shall  pay  out  notes  issued  through  another  under  pen- 
alty of  a  tax  of  ten  per  centum  upon  the  face  value  of  notes 


279 

so  paid  out.  Notes  presented  for  redemption  at  the  Treasury  of 
the  United  States  shall  be  paid  out  of  the  redemption  fund  and 
returned  to  the  Federal  reserve  banks  through  which  they  were 
originally  issued,  and  thereupon  such  Federal  reserve  bank  shall, 
upon  demand  of  the  Secretary  of  the  Treasury,  reimburse  such 
redemption  fund  in  lawful  money  or,  if  such  Federal  reserve 
notes  have  been  redeemed  by  the  Treasurer  in  gold  or  gold  cer- 
tificates, then  such  funds  shall  be  reimbursed  to  the  extent  deemed 
necessary  by  the  Secretary  of  the  Treasury  in  gold  or  gold  cer- 
tificates, and  such  Federal  reserve  bank  shall,  so  long  as  any  of 
its  Federal  reserve  notes  remain  outstanding,  maintain  with  the 
Treasurer  in  gold  an  amount  sufficient  in  the  judgment  of  the 
Secretary  to  provide  for  all  redemptions  to  be  made  by  the 
Treasurer.  Federal  reserve  notes  received  by  the  Treasurer  other- 
wise than  for  redemption  may  be  exchanged  for  gold  out  of  the 
redemption  fund  hereinafter  provided  and  returned  to  the  re- 
serve bank  through  which  they  were  originally  issued,  or  they 
may  be  returned  to  such  bank  for  the  credit  of  the  United  States. 
Federal  reserve  notes  unfit  for  circulation  shall  be  returned  by  the 
Federal  reserve  agents  to  the  Comptroller  of  the  Currency  for 
cancellation  and  destruction.  (Sec.  16,  Act  Dec.  23,  1913,  as 
amended  by  Sec.  7,  Act  June  21,  1917;  40  Stat.  L.,  236.) 

Deposit  of  Federal  Reserve  Notes  for  Credit  or  Redemption. — A 
Federal  Reserve  Bank  receiving  Federal  reserve  notes  issued  by  an- 
other Federal  Reserve  Bank  may  return  such  notes  to  the  issuing  bank 
either  for  redemption  or  for  credit.  (Opinion  of  Counsel  of  Board, 
July  30,  1915.) 

Transportation  Charges  on  Federal  Reserve  Notes.— -Each  Fed- 
eral Reserve  Bank  must  pay  all  expenses  incident  to  the  issue  and 
retirement  of  its  own  Federal  reserve  notes,  including  transportation 
charges  on  notes  returned  to  the  bank  of  issue  from  any  other  Federal 
Reserve  Bank  or  from  the  Treasury  of  the  United  States  where  they 
have  been  redeemed.     (Opinion  of  Counsel  of  Board,  Jan.  18,  1916.) 

§  259.  Federal  Reserve  Notes — Redemption  Fund — Paramount 
Lien  on  Assets  of  Reserve  Bank. — The  Federal  Reserve  Board 
shall  require  each  Federal  reserve  bank  to  maintain  on  deposit  in 


280 

the  Treasury  of  the  United  States  a  sum  in  gold  sufficient  in  the 
judgment  of  the  Secretary  of  the  Treasury  for  the  redemption  of 
the  Federal  reserve  notes  issued  to  such  bank,  but  in  no  event  less 
than  five  per  centum  of  the  total  amount  of  notes  issued  less 
the  amount  of  gold  or  gold  certificates  held  by  the  Federal  re- 
serve agent  as  collateral  security;  but  such  deposit  of  gold  shall 
be  counted  and  included  as  part  of  the  forty  per  centum  reserve 
hereinbefore  required.  The  board  shall  have  the  right,  acting 
through  the  Federal  reserve  agent,  to  grant,  in  whole  or  in  part, 
or  to  reject  entirely  the  application  of  any  Federal  reserve  bank 
for  Federal  reserve  notes;  but  to  the  extent  that  such  application 
may  be  granted  the  Federal  Reserve  Board  shall,  through  its  local 
Federal  reserve  agent,  supply  Federal  reserve  notes  to  the  banks 
so  applying,  and  such  bank  shall  be  charged  with  the  amount  of 
notes  issued  to  it  and  shall  pay  such  rate  of  interest  as  may  be 
established  by  the  Federal  Eeserve  Board  on  only  that  amount 
of  such  notes  which  equals  the  total  amount  of  its  outstanding 
Federal  reserve  notes  less  the  amount  of  gold  or  gold  certificates 
held  by  the  Federal  reserve  agent  as  collateral  security.  Federal 
reserve  notes  issued  to  any  such  bank  shall,  upon  delivery,  to- 
gether with  such  notes  of  such  Federal  reserve  bank  as  may  be 
issued  under  section  eighteen  of  this  Act  upon  security  of  United 
States  two  per  centum  Government  bonds,  become  a  first  and 
paramount  lien  on  all  the  assets  of  such  bank.  (Sec.  16,  Act  Dec. 
23,  1913,  as  amended  by  Sec.  7,  Act  June  21,  1917;  40  Stat. 
L.,  237.) 

Interest  Charges  ox  Federal  Reserve  Notes. — The  Federal  Reserve 
Board  may,  in  its  discretion,  fix  the  amount  of  interest  which  shall 
be  charged  reserve  banks  for  the  use  of  Federal  reserve  notes  and  in 
this  manner  force  their  retirement  when  redundant  and  so  furnish 
elasticity.     (Informal  Ruling  of  Board,  April  28,  1916.) 

§  260.  Reduction   of    Outstanding    Federal   Eeserve    Notes. — 

Any  Federal  reserve  bank  may  at  any  time  reduce  its  liability 
for  oustanding  Federal  reserve  notes  by  depositing  with  the  Fed- 
eral reserve  agent  its  Federal  reserve  notes,  gold,  gold  certificates, 
or  lawful  money  of  the  United  States.     Federal  reserve  notes  so 


281 

deposited  shall  not  be  reissued,  except  upon  compliance  with  the 
conditions  of  an  original  issue.  (Sec.  16,  Act  Dec.  23,  1913,  as 
amended  by  Sec.  7,  Act  June  21,  1917;  40  Stat.  L.,  237.) 

Deposit  of  Silver  Certificates. — Inasmuch,  as  silver  certificates  are 
now  to  all  intents  and  purposes  lawful  money  they  may  be  received  by 
Federal  Reserve  Agents  when  offered  by  Federal  Reserve  Banks  to  re- 
duce liability  for  Federal  reserve  notes  outstanding.  (Informal  Ruling 
of  Board,  Jan.  12,  1915.) 

§  261.  Exchange  of  Federal  Reserve  Notes  for  Gold,  Gold  Cer- 
tificates or  Lawful  Money.—  The  Federal  reserve  agent  shall  hold 
such  gold,  gold  certificates,  or  lawful  money  available  exclusively 
for  exchange  for  the  outstanding  Federal  reserve  notes  when  of- 
fered by  the  reserve  bank  of  which  he  is  a  director.  Upon  the  re- 
quest of  the  Secretary  of  the  Treasury  the  Federal  Eeserve  Board 
shall  require  the  Federal  reserve  agent  to  transmit  to  the  Treasurer 
of  the  United  States  so  much  of  the  gold  held  by  him  as  collateral 
security  for  Federal  reserve  notes  as  may  be  required  for  the  ex- 
clusive purpose  of  the  redemption  of  such  Federal  reserve  notes, 
but  such  gold  when  deposited  with  the  Treasurer  shall  be  counted 
and  considered  as  if  collateral  security  on  deposit  with  the  Fed- 
eral reserve  agent.  (Sec.  16,  Act  Dec.  23,  1913,  as  amended  by 
Sec.  7,  Act  June  21,  1917;  40  Stat.  L.,  237.) 

Deposits  of  Gold  oe  Lawful  Moxey  by  a  Federal  Reserve  Age^t 
With  the  Federal  Reserve  Board. — Gold,  gold  certificates,  or  lawful 
money  deposited  by  the  Federal  Reserve  Bank  with  its  Federal  Reserve 
Agent  for  the  purpose  of  reducing  its  liability  for  outstanding  notes 
may  legally  be  deposited  by  such  agent  with  the  Federal  Reserve 
Board.     (Opinion  of  Counsel  of  Board,  June  23»  1915.) 

§  262.  Federal  Reserve  Notes — Substitution  of  Collateral  to — 
Retirement  of — Liability  of  Federal  Reserve  Agent  for. —  Any 
Federal  reserve  bank  may  at  its  discretion  withdraw  collateral 
deposited  with  the  local  Federal  reserve  agent  for  the  protection 
of  its  Federal  reserve  notes  issued  to  it  and  shall  at  the  same 
time  substitute  therefor  other  collateral  of  equal  amount  with 
the  approval  of  the  Federal  reserve  agent  under  regulations  to 


282 

be  prescribed  by  the  Federal  Reserve  Board.  Any  Federal  re- 
serve bank  may  retire  any  of  its  Federal  reserve  notes  by  deposit- 
ing them  with  the  Federal  reserve  agent  or  with  the  Treasurer 
of  the  United  States,  and  such  Federal  reserve  bank  shall  there- 
upon be  entitled  to  receive  back  the  collateral  deposited  with  the 
Federal  reserve  agent  for  the  security  of  such  notes.  Federal 
reserve  banks  shall  not  be  required  to  maintain  the  reserve  or  the 
redemption  fund  heretofore  provided  for  against  Federal  reserve 
notes  which  have  been  retired.  Federal  reserve  notes  so  de- 
posited shall  not  be  reissued  except  upon  compliance  with  the 
conditions  of  an  original  issue. 

All  Federal  reserve  notes  and  all  gold,  gold  certificates,  and 
lawful  money  issued  to  or  deposited  with  any  Federal  reserve 
agent  under  the  provisions  of  the  Federal  reserve  Act  shall  here- 
after be  held  for  such  agent,  under  such  rules  and  regulations 
as  the  Federal  Reserve  Board  may  prescribe,  in  the  joint  cus- 
tody of  himself  and  the  Federal  reserve  bank  to  which  he  is  ac- 
credited. Such  agent  and  such  Federal  reserve  bank  shall  be 
jointly  liable  for  the  safe-keeping  of  such  Federal  reserve  notes, 
gold,  gold  certificates,  and  lawful  money.  Nothing  herein  con- 
tained, however,  shall  be  construed  to  prohibit  a  Federal  reserve 
agent  from  depositing  gold  or  gold  certificates  with  the  Federal 
Reserve  Board,  to  be  held  b)r  such  board  subject  to  his  order,  or 
with  the  Treasurer  of  the  United  States  for  the  purposes  au- 
thorized by  law.  (Sec.  16,  Act  Dec.  23,  1913,  as  amended  by 
Sec.  7,  Act  June  21,  1917;  40  Stat.  L.,  237.) 

§  263.  Printing  of  Federal  Reserve  Notes. — In  order  to  furnish 
suitable  notes  for  circulation  as  Federal  reserve  notes,  the  Comp- 
troller of  the  Currency  shall,  under  the  direction  of  the  Secretary 
of  the  Treasury,  cause  plates  and  dies  to  be  engraved  in  the  best 
manner  to  guard  against  counterfeits  and  fraudulent  alterations, 
and  shall  have  printed  therefrom  and  numbered  such  quantities 
of  such  notes  of  the  denominations  of  $5,  $10,  $20,  $50,  $100, 
$500,  $1,000,  $5,000,  $10,000  as  may  be  required  to  supply  the 
Federal  reserve  banks.  Such  notes  shall  be  in  form  and  tender 
as  directed  by  the  Secretary  of  the  Treasury  under  the  provisions 


283 

of  this  Act  and  shall  bear  the  distinctive  numbers  of  the  several 
Federal  reserve  banks  through  which  they  are  issued.  (Sec.  16, 
Act  Dec.  23,  1913,  as  amended  by  Sec.  3,  Act  Sept.  26,  1918;  40 
Stat.  L.,  969.) 

§  264.  Reserve  Banks  as  Collecting  Agents  for  Member  Banks. 
— Every  Federal  reserve  bank  shall  receive  on  deposit  at  par  from 
member  banks  or  from  Federal  reserve  banks  checks  and  drafts 
drawn  upon  any  of  its  depositors,  and  when  remitted  by  a  Federal 
reserve  bank,  checks  and  drafts  drawn  by  any  depositor  in  any 
other  Federal  reserve  bank  or  member  bank  upon  funds  to  the 
credit  of  said  depositor  in  said  reserve  bank  or  member  bank. 
Nothing  herein  contained  shall  be  construed  as  prohibiting  a  mem- 
ber bank  from  charging  its  actual  expense  incurred  in  collecting 
and  remitting  funds,  or  for  exchange  sold  to  its  patrons.  The 
Federal  Eeserve  Board  shall,  by  rule,  fix  the  charges  to  be  col- 
lected by  the  member  banks  from  its  patrons  whose  checks  are 
cleared  through  the  Federal  reserve  bank  and  the  charge  which 
may  be  imposed  for  the  service  of  clearing  or  collection  rendered 
by  the  Federal  reserve  bank.     (Sec.  16,  Act  Dec.  23,  1913.) 

Method  of  Collecting  Bill  of  Lading  Dbafts. — 'Drafts  secured  by 
bill  of  lading  forwarded  to  a  reserve  bank  for  collection  by  one  of 
its  member  banks  may  be  credited  upon  receipt  and  wben  paid  the 
sending  bank  may  be  charged  interest  at  the  published  rate  for  the 
time  the  draft  is  outstanding  plus  the  actual  cost  of  collection.  (In- 
formal Ruling  of  Board,   Dec.  29,  1916.) 

§  265.  Transfer  of  Funds  Among  Reserve  Banks — Board  As 
Clearing  House  for  Reserve  Banks — Reserve  Banks  As  Clearing 
Houses  for  Member  Banks. — The  Federal  Eeserve  Board  shall 
make  and  promulgate  from  time  to  time  regulations  governing 
the  transfer  of  funds  and  charges  therefor  among  Federal  reserve 
banks  and  their  branches,  and  may  at  its  discretion  exercise  the 
functions  of  a  clearing  house  for  such  Federal  reserve  banks,  or 
may  designate  a  Federal  reserve  bank  to  exercise  such  functions. 
and  may  also  require  each  such  bank  to  exercise  the  functions  of 
a  clearing  house  for  its  member  banks.  (Sec.  16,  Act  Dec. 
23,  1913.) 


284 

REGULATION  J  OF  THE  FEDERAL  RESERVE  BOARD, 
SERIES  OF  1917. 

(Superseding  Regulation  J  of  1916.) 

CHECK  CLEARING  AND  COLLECTION. 

Section  16  of  the  Federal  Reserve  Act  authorizes  the  Federal  Re- 
serve Board  to  require  each  Federal  Reserve  Bank  to  exercise  the 
functions  of  a  clearing  house  for  its  member  banks,  and  Section  13  of 
the  Federal  Reserve  Act,  as  amended  by  the  act  approved  June  21, 
1917,  authorizes  each  Federal  Reserve  Bank  to  receive  from  any 
nonmember  bank  or  trust  company,  solely  for  the  purposes  of  ex- 
change or  of  collection,  deposits  of  current  funds  in  lawful  money, 
National  bank  notes,  Federal  reserve  notes,  checks,  and  drafts  payable 
upon  presentation,  or  maturing  notes  and  bills,  provided  such  non- 
member  bank  or  trust  company  maintains  with  its  Federal  Reserve 
Bank  a  balance  sufficient  to  offset  the  items  in  transit  held  for  its  ac- 
count by  the  Federal  Reserve  Bank. 

In  pursuance  of  the  authority  vested  in  it  under  these  provisions  of 
law,  the  Federal  Reserve  Board,  desiring  to  afford  both  to  the  public 
and  to  the  various  banks  of  the  country  a  direct,  expeditious,  and 
economical  system  of  check  collection  and  settlement  of  balances,  has 
arranged  to  have  each  Federal  Reserve  Bank  exercise  the  functions 
of  a  clearing  house  for  such  of  its  member  banks  as  desire  to  avail 
themselves  of  its  privileges  and  for  such  State  banks  and  trust  com- 
panies as  may  maintain  with  the  Federal  Reserve  Bank  a  balance 
sufficient  to  qualify  it  as  a  clearing  member  under  the  provisions  of 
Section   13. 

Each  Federal  Reserve  Bank  shall  exercise  the  functions  of  a  clear- 
ing house  under  the  following  general  terms  and  conditions: 

(1)  Each  Federal  Reserve  Bank  will  receive  at  par  from  its  mem- 
ber banks  and  from  nonmember  banks  in  its  district  which  have 
become  clearing  members,  checks*  drawn  on  all  member  and  clearing 
member  banks  and  on  all  other  nonmember  banks  which  agree  to 
remit  at  par  through  the  Federal  Reserve  Bank  of  their  district. 

(2)  Each  Federal  Reserve  Bank  will  receive  at  par  from  other 
Federal  Reserve  Banks  and  will  receive  at  par  from  all  member  and 
clearing  member  banks,  regardless  of  their  location,  for  the  credit  of 

*A  check  is  generally  defined  as  a  draft  or  order  upon  a  bank  or  or- 
der upon  a  bank  or  banking  house,  purporting  to  be  drawn  upon  a 
deposit  of  funds,  for  the  payment  at  all  events  of  a  certain  sum  of 
money  to  a  certain  person  therein  named,  or  to  him  or  his  order,  or 
to  bearer,  and  payable  instantly  on  demand. 


285 

their  accounts  with  their  respective  Federal  Reserve  Banks,  checks 
drawn  upon  all  member  and  clearing  member  banks  of  its  district 
and  upon  all  other  nonmember  banks  of  its  district  whose  checks  can 
be  collected  at  par  by  the  Federal  Reserve  Bank.  The  Federal  Re- 
serve Banks  will  prepare  a  par  list  of  all  nonmember  banks,  to  be 
revised  from  time  to  time,  which  will  be  furnished  to  member  and 
clearing  member  banks. 

(3)  Immediate  credit  entry  upon  receipt  subject  to  final  payment 
will  be  made  for  all  such  items  upon  the  books  of  the  Federal  Reserve 
Bank  at  full  face  value,  but  the  proceeds  will  not  be  counted  as  part 
of  the  minimum  reserve  nor  become  available  to  meet  checks  drawn 
until  actually  collected,  in  accordance  with  the  best  practice  now  pre- 
vailing. 

(4)  Checks  received  by  a  Federal  Reserve  Bank  on  its  member  or 
clearing  member  banks  will  be  forwarded  direct  to  such  banks  and 
will  not  be  charged  to  their  accounts  until  sufficient  time  has  elapsed 
within  which  to  receive  advice  of  payment. 

(5)  In  the  selection  of  collecting  agents  for  handling  checks  on  non- 
member  banks,  which  have  not  become  clearing  members,  member 
banks  will  be  given  the  preference. 

(6)  Under  this  plan  each  Federal  Reserve  Bank  will  receive  at 
par  from  its  member  and  clearing  member  banks  checks  on  all  mem- 
ber and  clearing  member  banks  and  on  all  other  nonmember  banks 
whose  checks  can  be  collected  at  par  by  any  Federal  Reserve  Bank. 
Member  and  clearing  member  banks  will  be  required  by  the  Federal 
Reserve  Board  to  provide  funds  to  cover  at  par  all  checks  received 
from  or  for  the  account  of  their  Federal  Reserve  Banks:  Provided, 
hoicever,  That  a  member  or  clearing  member  bank  may  ship  currency 
or  specie  from  its  own  vaults  at  the  expense  of  its  Federal  Reserve 
Bank  to  cover  any  deficiency  which  may  arise  because  of  and  only 
in  the  case  of  inability  to  provide  items  to  offset  checks  received  from 
or  for  the  account  of  its  Federal  Reserve  Bank.* 

(7)  Section  19  of  the  Federal  Reserve  Act  provides  that — i 

The  required  balance  carried  by  a  member  bank  with  a  Federal 
Reserve  Bank  may,  under  the  regulations  and  subject  to  such  penalties 
as  may  be  prescribed  by  the  Federal  Reserve  Board,  be  checked  against 
and  withdrawn  by  such  member  bank  for  the  purpose  of  meeting 
existing  liabilities:     Provided,   hoicever,  That  no  bank  shall  at  any 

*  In  accordance  with  instructions  issued  by  the  Federal  Reserve 
Board  on  April  24,  1917,  the  various  Federal  Reserve  Banks  have  is- 
sued circulars  setting  forth  the  conditions  under  which  their  respec- 
tive member  banks  may  draw  drafts  on  their  Reserve  Bank  accounts 
payable  with  or  through  any  other  Federal  Reserve  Bank. 


286 

time  make  new  loans  or  shall  pay  any  dividends  unless  and  until  the 
total  balance  required  by  law  is  fully  restored. 

It  is  manifest  that  items  in  process  of  collection  can  not  lawfully 
be  counted  as  part  of  the  minimum  reserve  balance  to  be  carried  by 
a  member  bank  with  its  Federal  Reserve  Bank.  Therefore,  should  a 
member  bank  draw  against  such  items  the  draft  would  be  charged 
against  its  reserve  balance  if  such  balance  were  sufficient  in  amount 
to  pay  it;  but  any  resulting  impairment  of  reserve  balances  would 
be  subject  to  all  the  penalties  provided  by  the  Act. 

In  as  much  as  it  is  essential  that  the  law  in  respect  to  the  mainten- 
ance by  member  banks  of  the  required  minimum  reserve  balance 
shall  be  strictly  complied  with,  the  Federal  Reserve  Board,  under 
authority  vested  in  it  by  Section  19  of  the  Act,  hereby  prescribes  as 
the  penalty  for  any  deficiency  in  reserves  a  sum  equivalent  to  an 
interest  charge  on  the  amount  of  the  deficiency  of  2  per  cent,  per 
annum  above  the  ninety  day  discount  rate  of  the  Federal  Reserve 
Bank  of  the  district  in  which  the  member  bank  is  located.  The  Board 
reserves  the  right  to  increase  this  penalty  whenever  conditions  re- 
quire it. 

For  the  purpose  of  keeping  their  reserve  balances  Intact  member 
banks  may  at  all  times  have  recourse  to  the  rediscount  facilities 
offered  by  their  respective  Federal  Reserve  Banks. 

(8)  Each  Federal  Reserve  Bank  will  determine  by  analysis  the 
amounts  of  uncollected  funds  appearing  on  its  books  to  the  credit  of 
each  member  bank.  Such  analysis  will  show  the  true  status  of  the 
reserve  held  by  the  Federal  Reserve  Bank  for  each  member  bank  and 
will  enable  it  to  apply  the  penalty  for  impairment  of  reserve. 

A  schedule  of  the  time  required  within  which  to  collect  checks  will 
be  furnished  to  each  bank  to  enable  it  to  determine  the  time  at  which 
any  item  sent  its  Federal  Reserve  Bank  will  be  counted  as  reserve 
and  become  available  to  meet  any  checks  drawn. 

(9)  In  handling  items  for  member  and  clearing  member  banks,  a 
Federal  Reserve  Bank  will  act  as  agent  only.  The  Board  will  require 
that  each  member  and  clearing  member  bank  authorize  its  Federal 
Reserve  Bank  to  send  checks  for  collection  to  banks  on  which  checks 
are  drawn,  and,  except  for  negligence,  such  Federal  Reserve  Bank 
will  assume  no  liability.  Any  further  requirements  that  the  Board 
may  deem  necessary  will  be  sent  forth  by  the  Federal  Reserve  Banks 
in  their  letters  of  instruction  to  their  member  and  clearing  member 
banks.  Each  Federal  Reserve  Bank  will  also  promulgate  rules  and 
regulations  governing  the  details  of  its  operations  as  a  clearing  house, 
such  rules  and  regulations  to  be  binding  upon  all  member  and  non- 
member  banks  which  are  clearing  through  the  Federal  Reserve  Bank. 

(10)  The  cost  of  collecting  and  clearing  checks  must  necessarily  be 


287 

borne  by  the  banks  receiving  the  benefit  and  in  proportion  to  the 
service  rendered.  An  accurate  account  will  be  kept  by  each  reserve 
bank  of  the  cost  of  performing  this  service  and  the  Federal  Reserve 
Board  will,  by  rule,  fix  the  charge,  at  so  much  per  item,  which  may 
be  imposed  for  the  service  of  clearing  or  collection  rendered  by  the 
reserve  banks,  as  provided  in  Section  16  of  the  Federal  Reserve  Act. 

Meaning  of  Par  Collection. — It  should  be  sufficiently  clear  that 
checks,  even  though  collectible  at  par  and  given  immediate  credit 
entry  on  the  books  of  the  depositing  bank,  are  not  funds  immediately 
available  to  be  drawn  against,  and,  of  course,  this  applies  with  equal 
force  to  each  deposit  account  with  a  member  bank.  Thus,  if  a  customer 
deposits  with  his  bank  a  number  of  checks,  some  of  which  it  will  take 
two,  four,  or  six  days  to  collect  through  a  Federal  Reserve  Bank,  it 
is  obvious  that  he  is  entitled  only  to  be  given  credit  deferred  by  the 
length  of  time  it  takes  to  collect  the  items,  or,  if  he  asks  for  im- 
mediate credit  in  available  funds,  he  should  pay  something  for  the 
privilege. 

However,  as  was  heretofore  stated,  "The  Federal  Reserve  Board  has 
not  yet  laid  down  any  rule  as  to  what  charges  a  bank  may  make 
against  its  customers,  but  there  is  no  intention  at  all  that  a  member 
bank  shall  collect  its  customers'  checks  at  a  loss  to  itself;  that  is  to 
say,  without  some  fee  to  cover  cost  of  collection." 

The  expression  printed  upon  some  checks,  "Collectible  at  par  through 
Federal  Reserve  Bank,"  means  that  the  check  is  collectible  at  full 
face  value  through  the  Federal  Reserve  Bank,  but  if  it  is  desired  to 
use  a  check  as  cash  the  element  of  time  in  transit  must  be  paid  for. 

Under  the  principles  above  enunciated,  a  member  bank  will  be 
authorized  to  charge  its  customers  the  amount  per  item  charged  by 
the  Federal  Reserve  Bank  for  collecting  their  checks,  say  iy2  or  2 
cents  per  item,  plus  an  interest  charge  if  funds  are  advanced  before 
they  have  been  collected. 

By  providing  that  the  Federal  Reserve  Banks  shall  act  as  clearing 
houses  for  all  member  banks,  the  Act  in  effect  establishes  12  local 
points  at  which  all  checks  can  be  centered  and  collected,  and  it  is 
fully  expected  thereby  to  create  a  more  efficient  machine  for  check 
collections  than  has  ever  existed  in  the  country  before.  The  direct 
routing  of  items  which  it  is  expected  to  establish  in  connection  with 
this  plan,  should  very  considerably  reduce  time  in  transit,  and  last, 
but  not  least,  the  actual  cost  of  the  service  rendered  should  be  less 
to  the  banks,  and,  hence,  to  their  customers.  (Statement  of  Board, 
July,  191G.) 

Collection  of  Items  on  Non-member  Banks. — Understanding  of  the 
Board  that  agreement  of  a  member  bank  to  collect  items  on  nonmem- 


288 

ber  banks  is  voluntary  and  tbat  upon  due  notice  to  the  Federal  Re- 
serve Bank  arrangements  would  no  doubt  be  made  to  handle  such 
items  in  some  other  way.  The  Board  expects  a  member  bank  to  pay 
items  drawn  against  it  when  remitted  by  a  Federal  Reserve  Bank. 
(Informal  Ruling  of  Board,  July  28,  1916.) 

Gold  Settlement  Fund. — Under  the  power  conferred  upon  the  Board 
to  exercise  the  functions  of  a  clearing  house  for  the  reserve  banks, 
provision  has  been  made  for  the  establishment  of  a  gold  clearance 
fund  at  Washington,  D.  C,  for  the  purpose  of  effecting  with  as  little 
delay  and  cost  as  possible  settlements  between  reserve  banks. 

Gold  Settlement  Fund  as  Reserve. — Gold  kept  in  a  clearing  fund 
under  the  control  of  the  Board  may  be  counted  by  reserve  banks  de- 
positing such  gold  as  part  of  their  reserve  against  liabilities  other 
than  Federal  reserve  notes. 

The  gold  clearing  fund  may  be  kept  by  the  board  in  the  Treasury  or 
one  of  the  subtreasuries  of  the  United  States.  (Opinion  of  Counsel  of 
Board,  April  19,  1915.) 

Negotiability  of  Bills  and  Notes  Made  Payable  "in  Exchange." — 
A  bill  or  note  made  payable  "in  exchange"  is  not  payable  "in  money," 
and  is,  therefore,  not  negotiable.  Federal  Reserve  Banks  can  not  be 
required  to  receive  checks  and  drafts  drawn  in  this  manner  for  collec- 
tion or  credit.     (Opinion  of  Counsel  of  Board,  Aug.  10,  1916.) 

§  266.  Deposits  of  Gold  Coin  and  Gold  Certificates  with  Treas- 
urer by  Federal  Reserve  Banks  and  Agents. — That  the  Secretary 
of  the  Treasury  is  hereby  authorized  and  directed  to  receive  de- 
posits of  gold  coin  or  of  gold  certificates  with  the  Treasurer  or  any 
assistant  treasurer  of  the  United  States  when  tendered  by  any 
Federal  reserve  bank  or  Federal  reserve  agent  for  credit  to  its 
or  his  account  with  the  Federal  Eeserve  Board.  The  Secretary 
shall  prescribe  by  regulation  the  form  of  receipt  to  be  issued  by 
the  Treasurer  or  Assistant  Treasurer  to  the  Federal  reserve  bank 
or  Federal  reserve  agent  making  the  deposit,  and  a  duplicate  of 
such  receipt  shall  be  delivered  to  the  Federal  Eeserve  Board  by 
the  Treasurer  at  "Washington  upon  proper  advices  from  any  as- 
sistant treasurer  that  such  deposit  has  been  made.  Deposits  so 
made  shall  be  held  subject  to  the  orders  of  the  Federal  Eeserve 
Board  and  shall  be  payable  in  gold  coin  or  gold  certificates  on 
the  order  of  the  Federal  Eeserve  Board  to  any  Federal  reserve 


289 

bank  or  Federal  reserve  agent  at  the  Treasury  or  at  the  Subtreas- 
nry  of  the  United  States  nearest  the  place  of  business  of  such 
Federal  reserve  bank  or  such  Federal  reserve  agent:  Provided, 
however,  That  any  expense  incurred  in  shipping  gold  to  or  from 
the  Treasury  or  Subtreasuries  in  order  to  make  such  payments, 
or  as  a  result  of  making  such  payments,  shall  be  paid  by  the  Fed- 
eral Eeserve  Board  and  assessed  against  the  Federal  reserve  banks. 
The  order  used  by  the  Federal  Reserve  Board  in  making  such 
payments  shall  be  signed  by  the  governor  or  vice  governor,  or 
such  other  officers  or  members  as  the  board  may  by  regulation 
prescribe.  The  form  of  such  order  shall  be  approved  by  the  Sec- 
retary of  the  Treasury. 

The  expenses  necessarily  incurred  in  carrying  out  these  pro- 
visions, including  the  cost  of  the  certificates  or  receipts  issued 
for  deposits  received,  and  all  expenses  incident  to  the  handling 
of  such  deposits  shall  be  paid  by  the  Federal  Reserve  Board  and 
included  in  its  assessments  against  the  several  Federal  reserve 
banks. 

Gold  deposits  standing  to  the  credit  of  any  Federal  reserve 
bank  with  the  Federal  Reserve  Board  shall,  at  the  option  of  said 
bank,  be  counted  as  part  of  the  lawful  reserve  which  it  is  re- 
quired to  maintain  against  outstanding  Federal  reserve  notes, 
or  as  a  part  of  the  reserve  it  is  required  to  maintain  against 
deposits. 

Nothing  in  this  section  6hall  be  construed  as  amending  section 
six  of  the  Act  of  March  fourteenth,  nineteen  hundred,  as  amended 
by  the  Acts  of  March  fourth,  nineteen  hundred  and  seven,  March 
second,  nineteen  hundred  and  eleven,  and  June  twelfth,  nineteen 
hundred  and  sixteen,  nor  shall  the  provisions  of  this  section  be 
construed  to  apply  to  the  deposits  made  or  to  the  receipts  or  cer- 
tificates issued  under  those  Acts.  (Sec.  8,  Act  June  21,  1917; 
40  Stat.  L.,  238;  by  which  the  above  provisions  were  added  to 
Sec.  1G  of  the  Act  Dec.  23,  1913.) 

§  267.  Deposit  of  Bonds  by  National  Banks  with  Treasurer — 

Eepeal  of  Minimum  Deposit  Requirements.—  See  §  54,  page  74, 

Part  I. 
19 


290 

§  268.  Retirement  of  National  Bank  Notes — Sale  of  Bonds  to 
Reserve  Banks.— See  §  55,  page  74,  Part  I. 

§  269.  Federal  Reserve  Bank  Notes — Similarity  to  National 
Bank  Notes. — 'The  Federal  reserve  banks  purchasing  such  bonds 
shall  be  permitted  to  take  out  an  amount  of  circulating  notes  equal 
to  the  par  value  of  such  bonds. 

Upon  the  deposit  with  the  Treasurer  of  the  United  States  of 
bonds  so  purchased,  or  any  bonds  with  the  circulating  privilege 
acquired  under  section  four  of  this  Act,  any  Federal  reserve  bank 
making  such  deposit  in  the  manner  provided  by  existing  law,  shall 
be  entitled  to  receive  from  the  Comptroller  of  the  Currency  circu- 
lating notes  in  blank,  registered  and  countersigned  as  provided  by 
law,  equal  in  amount  to  the  par  value  of  the  bonds  so  deposited. 
Such  notes  shall  be  the  obligations  of  the  Federal  reserve  bank 
procuring  the  same,  and  shall  be  in  form  prescribed  by  the  Secre- 
tary of  the  Treasury,  and  ito  the  same  tenor  and  affect  as  National 
bank  notes  now  provided  by  law.  They  shall  be  issued  and  re- 
deemed under  the  same  terms  and  conditions  as  National  bank 
notes  except  that  they  shall  not  be  limited  to  the  amount  of  the 
capital  stock  of  the  Federal  reserve  bank  issuing  them.  (Sec.  18, 
Act  Dec.  23,  1913.) 

For  distinction  between  Federal  Reserve  Bank  notes  and  Federal 
reserve  notes  see  Informal  Ruling  of  Board,  May  12,  1916,  under  Sec. 
16  of  the  Act,  $256. 

§  270.  Exchange  by  Reserve  Banks  of  Two  Per  Cent.  Bonds  for 
Three  Per  Cent.  Bonds  and  One  Year  Notes. — Upon  application 
of  any  Federal  reserve  bank,  approved  by  the  Federal  Eeserve 
Board,  the  Secretary  of  the  Treasury  may  issue,  in  exchange  for 
United  States  two  per  centum  gold  bonds  bearing  the  circulation 
privilege,  but  against  which  no  circulation  is  outstanding,  one- 
year  gold  notes  of  the  United  States  without  the  circulation  priv- 
ilege, to  an  amount  not  to  exceed  one-half  of  the  two  per  centum 
bonds  so  tendered  for  exchange,  and  thirty-year  three  per  centum 
gold  bonds  without  the  circulation  privilege  for  the  remainder  of 
the  two  per  centum  bonds  so  tendered:  Provided,  That  at  the  time 


291 

of  such  exchange  the  Federal  reserve  bank  obtaining  such  one-year 
gold  notes  shall  enter  into  an  obligation  with  the  Secretary  of  the 
Treasury  binding  itself  to  purchase  from  the  United  States  for 
gold  at  the  maturity  of  such  one-year  notes,  an  amount  equal  to 
those  delivered  in  exchange  for  such  bonds,  if  so  requested  by  the 
Secretary,  and  at  each  maturity  of  one-year  notes  so  purchased  by 
such  Federal  reserve  bank,  to  purchase  from  the  United  States 
such  an  amount  of  one-year  notes  as  the  Secretary  may  tender  to 
such  bank,  not  to  exceed  the  amount  issued  to  such  bank  in  the 
first  instance,  in  exchange  for  the  two  per  centum  United  States 
gold  bonds;  said  obligation  to  purchase  at  maturity  such  notes 
shall  continue  in  force  for  a  period  not  to  exceed  thirty  years. 
(Sec.  18,  Act  Dec.  23,  1913.) 

Exchange  of  2  Per  Cent.  U.  S.  Bonds. — That  part  of  Section  18  which 
provides  that  the  Secretary  of  the  Treasury  may,  upon  application  of 
any  Federal  Reserve  Bank  approved  by  the  Board,  issue  in  exchange 
for  2  per  cent,  bonds  one-year  gold  notes  and  3  per  cent,  bonds,  the 
gold  notes  not  to  exceed  one-half  of  the  2  per  cent,  bonds  offered  for 
exchange,  becomes  effective  at  once  and  not  after  two  years  from  the 
passage  of  the  Act,  as  is  provided  for  other  paragraphs  of  Section  18. 
(Opinion  of  Counsel  of  Board,  Jan.  4,  1915.) 

One-Yeae  Gold  Notes. — The  obligation  of  a  Federal  Reserve  Bank  to 
renew  one-year  gold  notes  which  it  has  received  in  exchange  for 
United  States  2  per  cent,  bonds  can  not  be  transferred  to  another 
Federal  Reserve  Bank.  The  obligation  to  renew  is  binding  upon  the 
original  bank,  at  the  option  of  the  Secretary  of  the  Treasury,  for  a 
period  not  to  exceed  30  years,  though  such  bank  may  enter  into  a 
contract  with  another  corporation  or  individual  to  buy  such  renewal 
notes  from  it  when  issued.  Nothing  in  the  Act  prevents  the  sale  of 
one-year  notes  to  a  purchaser,  who  will  be  entitled  to  receive  payment 
from  the  Government  at  maturity.  (Opinion  of  Counsel  of  Board, 
March  10,  1916.) 

§  271.  Issue  of  One  Year  Three  Per  Cent.  Gold  Notes  and  Thirty 
Year  Three  Per  Cent.  Gold  Bonds. — For  the  purpose  of  making 
the  exchange  herein  provided  for,  the  Secretary  of  the  Treasury 
is  authorized  to  issue  at  par  Treasury  notes  in  coupon  or  registered 
form  as  he  may  prescribe  in  denominations  of  one  hundred  dollars, 
or  any  multiple  thereof,  bearing  interest  at  the  rate  of  three  per 


292 

centum  per  annum,  payable  quarterly,  such  Treasury  notes  to  be 
payable  not  more  than  one  year  from  the  date  of  their  issue  in 
gold  coin  of  the  present  standard  value,  and  to  be  exempt  as  to 
principal  and  interest  from  the  payment  of  all  taxes  and  duties  of 
the  United  States  except  as  provided  by  this  Act,  as  well  as  from 
taxes  in  any  form  by  or  under  State,  municipal,  or  local  authori- 
ties. And  for  the  same  purpose,  the  Secretary  is  authorized  and 
empowered  to  issue  United  States  gold  bonds  at  par,  bearing  three 
per  centum  interest  payable  thirty  years  from  date  of  issue,  such 
bonds  to  be  of  the  same  general  tenor  and  effect  and  to  be  issued 
under  the  same  general  terms  and  conditions  as  the  United  States 
three  per  centum  bonds  without  the  circulation  privilege  now  is- 
sued and  outstanding.    (Sec.  18,  Act  Dec.  23,  1913.) 

§  272.  Exchange  of  One  Year  Notes  for  Thirty  Year  Bonds. — 

Upon  application  of  any  Federal  reserve  bank,  approved  by  the 
Federal  Eeserve  Board,  the  Secretary  may  issue  at  par  6uch  three 
per  centum  bonds  in  exchange  for  the  one-year  gold  notes  herein 
provided  for.    (Sec.  18,  Act  approved  Dec.  23,  1913.) 

§  273.  Definition  of  Demand  and  Time  Deposits. — Demand  de- 
posits within  the  meaning  of  this  Act  shall  comprise  all  deposits 
payable  within  thirty  days,  and  time  deposits  shall  comprise  all 
deposits  payable  after  thirty  days,  and  all  savings  accounts  and 
certificates  of  deposit  which  are  subject  to  not  less  than  thirty  days' 
notice  before  payment,  and  all  postal  savings  deposits.  (Sec.  19, 
Act  Dec.  23,  1913,  as  amended  by  Sec.  10,  Act  approved  June 
21, 1917.) 

Regulation  D  of  Federal  Reserve  Board,  Series  of  1917: — 

Time  Deposit's  and  Savings  Accounts. — The  statutory  provisions 
are  omitted  to  save  repetition. 

TIME  DEPOSITS,  OPEN  ACCOUNTS. 

The  tennl  "time  deposits,  open  accounts"  shall  be  held  to  include  all 
accounts,  not  evidenced  by  certificates  of  deposit  or  savings  pass 
books,  in  respect  to  which  a  written  contract  is  entered  into  with  the 
depositor  at  the  time  the  deposit  is  made  that  neither  the  whole  nor 


293 

any  part  of  such  deposit  may  be  withdrawn  by  check  or  otherwise, 
except  on  a  given  date  or  on  written  notice  given  by  the  depositor  a 
certain  specified  number  of  days  in  advance,  in  no  case  less  than  30 
days. 

SAVINGS   ACCOUNTS. 

The  term  "savings  accounts"  shall  be  held  to  include  those  accounts 
of  the  bank  in  respect  to  which,  by  its  printed  regulations,  accepted 
by  the  depositor  at  the  time  the  account  is  opened — 

(a)  The  pass  book,  certificate,  or  other  similar  form  of  receipt  must 
be  presented  to  the  bank  whenever  a  deposit  or  withdrawal 
is  made,  and 
(&)  The  depositor  may  at  any  time  be  required  by  the  bank  to  give 
notice  of  an  intended  withdrawal  not  less  than  30  days  before 
a  withdrawal  is  made. 

TIME   CEETIFICATES    OF    DEPOSIT. 

A  "time  certificate  of  deposit"  is  defined  as  an  instrument  evidencing 
the  deposit  with  a  bank,  either  with  or  without  interest,  of  a  certain 
sum  specified  on  the  face  of  the  certificate  payable  in  whole  or  in  part 
to  the  depositor  or  on  his  order — 

(a)  On  a  certain  date,  specified  on  the  certificate,  not  less  than  30 

days  after  the  date  of  the  deposit,  or 
(6)  After  the  lapse  of  a  certain  specified  time  subsequent  to  the  date 
of  the  certificate,  in  no  case  less  than  30  days,  or 

(c)  Upon  written  notice  given  a  certain  specified  number  of  days, 

not  less  than  30  days  before  the  date  of  repayment,  and 

(d)  In  all  cases  only  upon  presentation  of  the  certificate  at  each 

withdrawal  for  proper  indorsement  or  surrender. 

Time  Certificates  of  Deposit  Which  Become  Payable  Within 
Thiety  Days. — A  certificate  of  deposit  which,  though  originally  pay- 
able in  60  or  90  days,  and  which,  though  originally  a  time  deposit 
within  the  meaning  of  the  regulations  of  the  Federal  Reserve  Board, 
becomes  a  demand  deposit  when  it  becomes  payable  within  30  days. 
(Opinion  of  Counsel  of  Board,  June  7,  1919.) 

Right  of  National  Banks  to  Advertise  Savings  Accounts. — The 
Federal  law  relating  to  the  establishment  and  operation  of  National 
banks  is  superior  to  and  controlling  over  a  State  law  which  might 
otherwise  apply  to  or  govern  the  operations  of  National  banks.  Con- 
gress having  conferred  on  National  banks  the  power  to  pay  Interest 
on  time  deposits,  it  is  evident  that  the  right  to  advertise  and  solicit 
such  savings  accounts  is  a  necessary  incident  to  the  exercise  of  that 


294 

power,  and  that  no  State  law  can  interfere  with  its  exercise.     (Opinion 
of  Counsel  of  Board,  Feb.  24,  1915.), 

Savings  Accounts  as  Time  Deposits. — Savings  accounts  opened  un- 
der regulations  which  do  not  require  the  presentation  of  the  pass  book 
on  withdrawal  of  deposits,  but  which  merely  authorize  the  member 
bank  to  require  the  presentation  of  such  book,  are  not  savings  ac- 
counts within  the  definition  of  that  term  in  Regulation  D,  series  of 
1916.     (Opinion  of  Counsel  of  Board,  Oct.  5,  1916.) 

Time  Deposits — Open  Accounts. — In  order  to  consider  an  open  ac- 
count a  time  deposit  under  the  provisions  of  Regulation  D,  the  bank 
in  which  the  deposit  is  made  must  require  30  days'  notice  of  an  in- 
tended withdrawal.     (Opinion  of  Counsel  of  Board,  Nov.  13,  1916.) 

Reserve  Against  Time  Deposits. — If  depositor  is  led  to  believe,  by 
advertisement  or  printed  rule,  that  savings  deposits  are  not  subject 
to  the  enforcement  of  60-day  notice  before  payment,  then  such  de- 
posits take  the  higher  rate  of  reserve.  Notice  may  be  waived  as  a 
matter  of  courtesy  under  the  definite  understanding  that  it  may  be 
applied  at  any  time.     (Informal  Ruling  of  Board,  July,  1915.) 

§  274.  Reserves  Carried  by  Member  Banks  Not  in  Reserve  or 
Central  Reserve  Cities. — Every  bank,  banking  association,  or 
trust  company  which  is  or  which  becomes  a  member  of  any  Fed- 
eral reserve  bank  shall  establish  and  maintain  reserve  balances 
with  its  Federal  reserve  bank  as  follows: 

(a)  If  not  in  a  reserve  or  central  reserve  city,  as  now  or  here- 
after defined,  it  shall  hold  and  maintain  with  the  Federal  re- 
serve bank  of  its  district  an  actual  net  balance  equal  to  not  less 
than  seven  per  centum  of  the  aggregate  amount  of  its  demand 
deposits  and  three  per  centum  of  its  time  deposits.  (Sec.  19, 
Act  Dec.  23,  1913,  as  amended  by  Sec.  10,  Act  June  21,  1917;  40 
Stat.  L.,  239.) 

For  form  to  be  used  in  the  computation  of  reserve  see  note  to  §  280, 
page  298. 

Member  banks  are  now  permitted  to  carry  with  their  Federal  Re- 
serve Bank  the  reserve  heretofore  required  to  be  kept  in  their  own 
vaults.  Section  7  of  the  act  April  24,  1917,  provides  that  no  reserve 
need  be  kept  against  deposits  of  public  moneys  by  the  United  States 


295 

in    designated    depositaries.     This    does   not    include    postal   savings 
deposits. 

Five  Per  Cent  Fund  as  Reserve. — The  5  per  cent,  redemption  fund 
deposited  with  the  Treasurer  of  the  United  States  can  not  be  counted 
as  part  of  lawful  reserve.     (See  Section  20  of  act,  page  300.) 

§  275.  Reserves  Carried  by  Member  Banks  Located  in  Reserve 
(b)  Cities. — If  in  a  reserve  city,  as  now  or  hereafter  defined,  it 
shall  hold  and  maintain  with  the  Federal  reserve  bank  of  its  dis- 
trict an  actual  net  balance  equal  to  not  less  than  ten  per  centum 
of  the  aggregate  amount  of  its  demand  deposits  and  three  per 
centum  of  its  time  deposits:  Provided,  however,  That  if  located 
in  the  outlying  districts  of  a  reserve  city  or  in  territory  added  to 
such  a  city  by  the  extension  of  its  corporate  charter,  it  may,  upon 
the  affirmative  vote  of  five  members  of  the  Federal  Eeserve  Board, 
hold  and  maintain  the  reserve  balances  specified  in  paragraph 
(a)  hereof.  (Sec.  19  of  Act  Dec.  23,  1913,  as  amended  by  Sec. 
10,  Act  June  21,  1917,  and  further  by  Sec.  4,  Act  Sept.  26,  1918; 
40  Stat.  L.,  970.) 

For  form  to  be  used  in  the  computation  of  reserve  see  note  to  §2S0, 
page  298. 

Reserve  of  Banks  in  Outlying  Districts  of  Reserve  and  Central 
Reserve  Cities. — The  fact  that  a  bank  is  located  in  what  may  have 
been  declared  by  the  Federal  Reserve  Board  to  be  an  outlying  district 
of  a  central  reserve  city  does  not  of  itself  entitle  the  bank  to  carry  a 
lower  reserve,  but  the  Board  should  act  on  each  case  and  determine 
what  amount  of  reserve  should  be  carried  against  demand  deposits 
by  each  bank  so  located.  (Opinion  of  Counsel  of  Board,  October  19, 
1918.) 

§  276.  Reserves  Carried  by  Member  Banks  Located  in  Central 
Reserve  Cities. — (c)  If  in  a  central  reserve  city,  as  now  or  here- 
after defined,  it  shall  hold  and  maintain  with  the  Federal  reserve 
bank  of  its  district  an  actual  net  balance  equal  to  not  less  than 
thirteen  per  centum  of  the  aggregate  amount  of  its  demand  de- 
posits and  three  per  centum  of  its  time  deposits:  Provided,  hoiv- 
ever,  That  if  located  in  the  outlying  districts  of  a  central  reserve 
city  or  in  territory  added  to  such  city  by  the  extension  of  its 


296 

corporate  charter,  it  may,  upon  the  affirmative  vote  of  five  mem- 
bers of  the  Federal  Reserve  Board,  hold  and  maintain  the  reserve 
balances  specified  in  paragraphs  (a)  or  (b)  thereof.  (Sec.  19, 
Act  Dec.  23,  1913,  as  amended  by  Sec.  10,  Act  June  21,  1917, 
and  further  by  Sec.  4,  Act  Sept.  26,  1918;  40  Stat.  L.,  970.) 

For  form  to  be  used  in  the  computation  of  reserve  see  note  to  $280, 
page  298. 

§  277.  Eligible  Paper  as  Beserve.— That  part  of  section  19  of 
the  Federal  Reserve  Act,  as  amended  by  Act  Aug.  15,  1914,  which 
provided  that  any  Federal  reserve  bank  may  receive  from  the 
member  banks  as  reserves  not  exceeding  one-half  of  each  install- 
ment, eligible  paper  as  described  in  section  13,  properly  indorsed 
and  acceptable  to  the  said  reserve  bank,  is  repealed.  (Act  June 
21,  1917.) 

§  278.  Limit  of  Deposit  of  Member  with  Non-Member  Bank 
— Member  as  Agent  of  Non-Member  Bank  in  Discounting  with 
Reserve  Banks.— No  member  bank  shall  keep  on  deposit  with  any 
State  bank  or  trust  company  which  is  not  a  member  bank  a  sum 
in  excess  of  ten  per  centum  of  its  own  paid-up  capital  and  sur- 
plus. No  member  bank  shall  act  as  a  medium  or  agent  of  a  non- 
member  bank  in  applying  for  or  receiving  discounts  from  a 
Federal  reserve  bank  under  the  provisions  of  this  Act,  except  by 
permission  of  the  Federal  Reserve  Board.  (Sec.  19,  Act  Dec.  23, 
1913,  as  amended  by  Act  Aug.  15,  1914,  and  further  by  Sec.  10, 
Act  June  21,  1917;  40  Stat.  L.,  239.) 

State  Bank  Members. — This  section  applies  also  to  State  bank 
members. 

See  Regulation  H  of  Federal  Reserve  Board,  Series  of  1916,  under 
Section  9  of  the  Act  regarding  membership  of  State  banks  and  trust 
companies. 

Excessive  Loans. — Law  provides  that  "all  deposits  of  a  National 
bank  with  nonmember  banks  which  are  in  excess  of  10  per  cent,  of  its 
Capital  and  surplus  are  to  be  reported  as  excessive  loans."  Comp- 
troller has  no  choice  but  to  enforce  this  requirement.  (Informal 
Ruling  of  Board,  June  16,  1915.) 


297 

§  279.  Withdrawal  of  Required  Eeserves— Penalties.— The  re- 
quired balance  carried  by  a  member  bank  with  a  Federal  reserve 
bank  may,  under  the  regulations  and  subject  to  such  penalties 
as  may  be  prescribed  by  the  Federal  Eeserve  Board,  be  checked 
against  and  withdrawn  by  such  member  bank  for  the  purpose  of 
meeting  existing  liabilities:  Provided,  however,  That  no  bank 
shall  at  any  time  make  new  loans  or  shall  pay  any  dividends  un- 
less and  until  the  total  balance  required  by  law  is  fully  restored. 
(Sec.  19,  Act  Dec.  23,  1913,  as  amended  by  Act  Aug.  15,  1914, 
and  further  by  Sec.  10,  Act  June  21,  1917;  40  Stat.  L.,  239.) 

§  280.  Calculation  of  Reserves. — In  estimating  the  balances  re- 
quired by  this  Act,  the  net  difference  of  amounts  due  to  and  from 
other  banks  shall  be  taken  as  the  basis  for  ascertaining  the  de- 
posits against  which  required  balances  with  Federal  reserve  banks 
shall  be  determined.  (Sec.  19,  Act  Dec.  23,  1913,  as  amended 
by  Act  Aug.  15,  1914,  and  further  by  Sec.  10,  Act  June  21,  1917; 
40  Stat.  L.,  240.) 

Reserve  of  Bank  With  Branches. — Reserve  to  be  maintained  by 
a  bank  having  branches  should  be  based  upon  the  balance  of  both 
the  parent  bank  and  the  branches.  Capital-stock  subscriptions  and 
dividends  should  be  treated  in  the  same  manner.  If,  as  a  matter  of 
bookkeeping,  banks  desire  to  carry  separate  checking  accounts,  there 
is  no  objection.     (Informal  Ruling  of  Board,  May  22,  1915.) 

Computation  of  Reserves. — Under  Section  19  as  amended  banks 
are  permitted  to  count  as  reserve  only  actual  balances  carried  with 
a  Federal  Reserve  Bank.  In  estimating  the  amount  against  which 
reserve  must  be  carried  they  are  permitted  to  deduct  balances  due 
from  banks  from  balances  due  to  banks  and  to  carry  reserve  only 
against  the  net  balance  due  to  banks  and  against  other  deposit 
liabilities.     (Page  614,  Aug.,  1917,  Bulletin.) 

Government  Deposits,  Reserves  Against. — Under  the  provisions  of 
Section  7  of  the  act  approved  April  24,  1917,  National  banks  and 
member  banks  are  not  required  to  maintain  reserves  against  Govern- 
ment deposits  other  than  postal  savings  deposits,  regardless  of  the 
source  of  the  funds  deposited.  This  section,  however,  does  not  apply 
to  Federal  Reserve  Banks.  (Opinion  of  Counsel  of  Board,  May  5, 
1917.) 


298 

Reserves,  Deductions  in  Determining. — Member  banks  in  deter- 
mining the  amount  against  which  reserves  must  be  carried,  may 
deduct  all  Government  deposits,  except  postal  savings  deposits,  from 
the  amount  of  gross  demand  deposits,  and  may  deduct  from  the 
amount  of  balances  due  to  other  banks  the  amount  of  balances  due 
from  other  banks,  and  may  include  in  the  amount  due  from  banks 
checks  drawn  on  banks  located  in  the  same  place  and  exchanges  for 
clearing  houses.  The  law,  however,  does  not  permit  member  banks 
to  deduct  checks  on  other  banks  located  in  the  same  place  or  ex- 
changes for  clearing  houses  from  gross  demand  deposits,  nor  does  it 
permit  cash  on  hand  to  be  deducted  from  gross  demand  deposits. 
(Opinion  of  Counsel  of  Board,  July  19,  1917.) 

Deposits  With  a  Federal  Reserve  Bank  from  the  Savings  Depart- 
ment of  a  Trust  Company  Member,  Bank  to  Count  As  Reserve. — A 
member  bank  which  operates  both  a  savings  department  and  a  com- 
mercial banking  department  may  properly  deposit  funds  out  of  its 
savings  department  with  the  Federal  Reserve  Bank  to  count  as  reserve 
against  its  savings  deposits  even  though  under  the  terms  of  the 
State  law  such  a  deposit  with  the  Federal  Reserve  Bank  is  not  subject 
to  any  claim  by  the  Federal  Reserve  Bank  against  the  member  bank 
itself  as  distinct  from  the  savings  department.  (Opinion  of  Counsel 
of  Board,  May  29,  1919.) 

Form  for  Computation  of  Reserve. — 

COMPUTATION  OF  RESERVE  TO  BE  CARRIED  WITH  THE 
FEDERAL  RESERVE  BANKS  BY  NATIONAL  BANKS. 


DEMAND    DEPOSITS. 

1.  Deposits    (including   Dividends   unpaid),    other 

than  United  States  Government  deposits,  pay- 
able within  thirty  days 

2.  Balances   due   to   banks,   other   than 

Federal  Reserve  Bank  $ 

3.  (Amount    due    to    Federal    Reserve 

Bank  deferred  credits $ 

4.  Cashier's   Checks  on  own   Bank   out- 

standing  $ 

5.  Certified  Checks  outstanding ...$ 

TOTAL   DUE   TO   BANKS    (Items 

2,  3,  4  and  5) $ >- 


299 

Less: 

6.  Balances  due  from  banks  other  than 

Federal   Reserve    Bank    and    foreign 

banks   $ 

7.  Items  with  Federal  Reserve  Bank  in 
process  of  collection i $ 

8.  Checks  on  other  banks  in  same  place. .  $ 

9.  Exchange  for  clearing  house $ 

TOTAL    DEDUCTIONS     (Items    6, 

7,  8  and  9)  $. 

10.  Net  Balance  due  to  banks* 

11.  TOTAL    DEMAND    DEPOSITS 

(Items  1  and  10) 

TIME  DEPOSITS. 

12.  Savings  Accounts  (subject  to  not  less 

than  30  days'  notice  before  payment)  $. 

13.  Certificates  of  deposit  (subject  to  not 

less  than  30  days'  notice  before  pay- 
ment)      , $. 

14.  Other  deposits  payable  only  after  30 

days    $ . 

15.  Postal  Savings  deposits $ . 

16.  TOTAL  TIME  DEPOSITS    (Items 

12,  13,  14  and  15) 

RESERVE   REQUIRED. 

Banks   in   Central   Reserve   Cities,   13%; 

Reserve  Cities,  10%;    elsewhere,  7% 

of  Demand  deposits 

(Item    1)     ../ $. 

3%  of  time  deposits  (Item  16)   $. 

TOTAL  RESERVE  to  be  maintained 
with  Federal  Reserve  Bank  


Note. — "Balances  due  to  all  banks  other  than  Federal  Reserve  Bank," 
(Item  2  Demand  Deposits)  should  include  balances  due  to  foreign 
banks. 

♦Should  the  aggregate  "due  from  banks"  (Items  6,  7,  8  and  9)  ex- 
ceed the  aggregate  "due  to  banks"  (Items  2,  3,  4  and  5),  both  items 
must  be  omitted  from  the  calculation. 


300 

§  281.  Membership  of  Banks  Located  in  United  States  but 
Outside  of  Continental  United  States.—  National  banks,  or  banks 
organized  under  local  laws,  located  in  Alaska  or  in  a  dependency 
or  insular  possession  or  any  part  of  the  United  States  outside  the 
continental  United  States  may  remain  non-member  banks,  and 
shall  in  that  event  maintain  reserves  and  comply  with  all  the 
conditions  now  provided  by  law  regulating  them;  or  said  banks 
may,  with  the  consent  of  the  Reserve  Board,  become  member  banks 
of  any  one  of  the  reserve  districts,  and  shall  in  that  event  take 
stock,  maintain  reserves,  and  be  subject  to  all  the  other  provisions 
of  this  Act.  (Sec.  19,  Act  Dec.  23,  1913,  as  amended  by  Act 
Aug.  15,  1914,  and  further  by  Sec.  10,  Act  June  21,  1917;  40 
Stat.  L.,  240.) 

§  282.  Five  Per  Cent.  Redemption  Fund  As  Reserve.—  So  much 
of  sections  two  and  three  of  the  Act  of  June  twentieth,  eighteen 
hundred  and  seventy-four,  entitled  "An  Act  fixing  the  amount  of 
United  States  notes,  providing  for  a  redistribution  of  the  National 
bank  currency,  and  for  other  purposes,"  as  provides  that  the  fund 
deposited  by  any  National  banking  association  with  the  Treasurer 
of  the  United  States  for  the  redemption  of  its  notes  shall  be 
counted  as  a  part  of  its  lawful  reserve  as  provided  in  the  Act  afore- 
said, is  hereby  repealed.  And  from  and  after  the  passage  of  this 
Act  such  fund  of  five  per  centum  shall  in  no  case  be  counted  by 
any  National  banking  association  as  a  part  of  its  lawful  reserve. 
(Sec.  20,  Act  Dec.  23,  1913.) 

§  283.  Appointment  of  Examiners — Examinations  of  Member 
Banks.— See  §  131  and  §  217  ante. 

§  284.  Salaries  of  Examiners — Expense  of  Examination. — 
See  §  131,  page  129. 

§  285.  Special  Examination  of  Members  by  Reserve  Banks. — 
— In  addition  to  the  examinations  made  and  conducted  by  the 
Comptroller  of  the  Currency,  every  Federal  reserve  bank  may, 
with  the  approval  of  the  Federal  reserve  agent  or  the  Federal 


301 

Reserve  Board,  provide  for  special  examination  of  member  banks 
within  its  district.  The  expense  of  such  examinations  shall  be 
borne  by  the  bank  examined.  Such  examinations  shall  be  so 
conducted  as  to  inform  the  Federal  reserve  bank  of  the  condition 
of  its  member  banks  and  of  the  lines  of  credit  which  are  being 
extended  by  them.  Every  Federal  reserve  bank  shall  at  all  times 
furnish  to  the  Federal  Eeserve  Board  such  information  as  may 
be  demanded  concerning  the  condition  of  any  member  bank  within 
the  district  of  the  said  Federal  reserve  bank.  (Sec.  21,  Act  Dec. 
23, 1913.) 

See  Regulation  H  of  Federal  Reserve  Board,  Series  of  1917,  under 
Section  9  of  the  Act. 

§  286.  Limitation  of  Visitorial  Powers.— No  bank  shall  be 
subject  to  any  visitorial  powers  other  than  such  as  are  authorized 
by  law,  or  vested  in  the  courts  of  justice  or  such  as  shall  be  or  shall 
have  been  exercised  or  directed  by  Congress,  or  by  either  House 
thereof  or  by  any  committee  of  Congress  or  of  either  House  duly 
authorized.     (Sec.  21,  Act  Dec.  23,  1913.) 

See  Regulation  H  of  Federal  Reserve  Board,  Series  of  1917,  under 
Section  9  of  the  Act. 

§  287.  Examination  of  Reserve  Banks  by  Board—  The  Federal 
Eeserve  Board  shall,  at  least  once  each  year,  order  an  examination 
of  each  Federal  reserve  bank,  and  upon  joint  application  of  ten 
member  banks  the  Federal  Eeserve  Board  shall  order  a  special 
examination  and  report  of  the  condition  of  any  Federal  reserve 
bank.     (Sec.  21,  Act  Dec.  23,  1913.) 

Examinations  of  Federal  Reserve  Banks. — Board  declines  to  permit 
clearing-house  examiners  or  any  examiners  representing  a  member 
bank  or  group  of  member  banks  to  examine  a  Federal  Reserve  Bank. 
(Informal  Ruling  of  Board,  Sept.  9,  1915.); 

§  288.  Fees,  Commissions,  Gifts,  etc.,  Prohibited  to  Officers, 
Employees,  etc.,  of  Member  Banks,  and  to  Bank  Examiners — 
Exceptions. — (a)  No  member  bank  and  no  officer,  director,  or  em- 


302 

ployee  thereof  shall  hereafter  make  any  loan  or  grant  any  gratuity 
to  any  bank  examiner.  Any  bank  officer,  director,  or  employee 
violating  this  provision  shall  be  deemed  guilty  of  a  misdemeanor 
and  shall  be  imprisoned  not  exceeding  one  year  or  fined  not  more 
than  $5,000,  or  both;  and  may  be  fined  a  further  sum  equal  to 
the  money  so  loaned  or  gratuity  given. 

Any  examiner  accepting  a  loan  or  gratuity  from  any  bank  ex- 
amined by  him  or  from  an  officer,  director,  or  employee  thereof 
shall  be  deemed  guilty  of  a  misdemeanor  and  shall  be  imprisoned 
one  year  or  fined  not  more  than  $5,000,  or  both,  and  may  be 
fin  fid  a  further  sum  equal  to  the  money  so  loaned  or  gratuity 
given,  and  shall  forever  thereafter  be  disqualified  from  holding 
office  as  a  national  bank  examiner. 

(b)  Xo  Xational  bank  examiner  shall  perform  any  other  service 
for  compensation  while  holding  such  office  for  any  bank  or  officer, 
director,  or  employee  thereof. 

Xo  examiner,  public  or  private,  shall  disclose  the  names  of 
borrowers  or  the  collateral  for  loans  of  a  member  bank  to  other 
than  the  proper  officers  of  such  bank  without  first  having  obtained 
the  express  permission  in  writing  from  the  Comptroller  of  the 
Currency,  or  from  the  board  of  directors  of  such  bank,  except 
when  ordered  to  do  so  by  a  court  of  competent  jurisdiction,  or  by 
direction  of  the  Congress  of  the  United  States,  or  of  either  House 
thereof,  or  any  committee  of  Congress,  or  of  either  House  duly 
authorized.  Any  bank  examiner  violating  the  provisions  of  this 
subsection  shall  be  imprisoned  not  more  than  one  year  or  fined 
not  more  than  $5,000,  or  both. 

(c)  Except  as  herein  provided,  any  officer,  director,  employee, 
or  attorney  of  a  member  bank  who  stipulates  for  or  receives  or 
consents  or  agrees  to  receive  any  fee,  commission,  gift,  or  thing 
of  value  from  any  person,  firm,  or  corporation,  for  procuring  or 
endeavoring  to  procure  for  such  person,  firm,  or  corporation,  or 
for  any  other  person,  firm  or  corporation,  any  loan  from  or  the 
purchase  or  discount  of  any  paper,  note,  draft,  check,  or  bill  of 
exchange  by  such  member  bank  shall  be  deemed  guilty  of  a  mis- 
demeanor and  shall  be  imprisoned  not  more  than  one  year  or 
fined  not  more  than  $5,000,  or  both. 


303 

(d)  Any  member  bank  may  contract  for,  or  purchase  from 
any  of  its  directors  or  from  any  firm  of  which,  any  of  its  directors 
is  a  member,  any  securities  or  other  property,  when  (and  not 
otherwise)  such  purchase  is  made  in  the  regular  course  of  busi- 
ness upon  terms  not  less  favorable  to  the  bank  than  those  offered 
to  others,  or  when  such  purchase  is  authorized  by  a  majority  of 
the  board  of  directors  not  interested  in  the  sale  of  such  securities 
or  property,  such  authority  to  be  evidenced  by  the  affirmative  vote 
or  written  assent  of  such  directors :  Provided,  however,  That 
when  any  director,  or  firm  of  which  any  director  is  a  member, 
acting  for  or  on  behalf  of  others,  sells  securities  or  other  property 
to  a  member  bank,  the  Federal  Reserve  Board  by  regulation  may, 
in  any  or  all  cases,  require  a  full  disclosure  to  be  made,  on  forms 
to  be  prescribed  by  it,  of  all  commissions  or  other  considerations 
received,  and  whenever  such  director  or  firm,  acting  in  his  or  its 
own  behalf,  sells  securities  or  other  property  to  the  bank  the  Fed- 
eral Eeserve  Board,  by  regulation,  may  require  a  full  disclosure 
of  all  profit  realized  from  such  sale. 

Any  member  bank  may  sell  securities  or  other  property  to  any 
of  its  directors,  or  to  a  firm  of  which  any  of  its  directors  is  a 
member,  in  the  regular  course  of  business  on  terms  not  more  favor- 
able to  such  director  or  firm  than  those  offered  to  others,  or  when 
such  sale  is  authorized  by  a  majority  of  the  board  of  directors  of 
a  member  bank  to  be  evidenced  by  their  affirmative  vote  or  writ- 
ten assent:  Provided,  however,  That  nothing  in  this  subsection 
contained  shall  be  construed  as  authorizing  member  banks  to  pur- 
chase or  sell  securities  or  other  property  which  such  banks  are  not 
otherwise  authorized  by  law  to  purchase  or  sell. 

(e)  Xo  member  bank  shall  pay  to  any  director,  officer,  at- 
torney, or  employee  a  greater  rate  of  interest  on  the  deposits  of 
such  director,  officer,  attorney,  or  employee  than  that  paid  to 
other  depositors  on  similar  deposits  with  such  member  bank. 

(f)  If  the  directors  or  officers  of  any  member  bank  shall 
knowingly  violate  or  permit  any  of  the  agents,  officers,  or  direc- 
tors of  any  member  bank  to  violate  any  of  the  provisions  of  this 
section  or  regulations  of  the  board  made  under  authority  thereof, 
every  director  and  officer  participating  in  or  assenting  to  such 


304 

violation  shall  be  held  liable  in  his  personal  and  individual  capacity 
for  all  damages  which  the  member  bank,  its  shareholders,  or  any 
other  persons  shall  have  sustained  in  consequence  of  such  violation. 
(Sec.  22,  Act  Dec.  23,  1913,  as  amended  by  Sec.  11,  Act  June  21, 
1917,  and  further  by  Sec.  5,  Act  Sept.  26,  1918;  40  Stat.  L.,  970.) 

INTERPRETATION    OF    SECTION    22    OF    THE    FEDERAL    RESERVE    ACT. — Any 

violation  of  the  provisions  of  Section  22  of  the  Federal  Reserve  Act  by 
officers,  directors,  or  employes  of  a  member  bank  constitutes  a  crime, 
punishable  by  fine  or  imprisonment.  No  ruling  or  interpretation  by 
the  Federal  Reserve  Board  would  afford  any  protection  to  a  person 
subsequently  indicted  by  a  Federal  Grand  jury  for  any  such  violation, 
it  not  being  within  the  province  of  the  Federal  Reserve  Board  to  make 
an  official  ruling  on  the  provision  of  this  section.  Whether  or  not 
a  contemplated  transaction  comes  within  the  prohibited  part  of  this 
section  is  a  question  which  should  be  determined  by  the  counsel  for 
the  bank  in  each  case.  (Opinions  of  Counsel  of  Board,  April  9,  1915, 
and  Aug.  14,  1917.) 

§  289.  Liability  of  Stockholders  of  National  Banks.—  See  §  46, 
page  57,  Part  I. 

§  290.  Loans  on  Heal  Estate  by  National  Banks.- -See  §  18, 
page  23,  Part  I. 

§  291.  Foreign  Branches  of  National  Banks. — Any  National 
banking  association  possessing  a  capital  and  surplus  of  $1,000;000 
or  more  may  file  application  with  the  Federal  Eeserve  Board  for 
permission  to  exercise,  upon  such  conditions  and  under  such  regu- 
lations as  may  be  prescribed  by  the  said  board,  either  or  both  of 
the  following  powers : 

First:  To  establish  branches  in  foreign  countries  or  depen- 
dencies or  insular  possessions  of  the  United  States  for  the  further- 
ance of  the  foreign  commerce  of  the  United  States,  and  to  act  if 
required  to  do  so  as  fiscal  agents  of  the  United  States.  (Sec.  25, 
Act  Dec.  23,  1913,  as  amended  by  Act  Sept.  7,  1916;  40  Stat. 
L.,  755.) 

Branch  Banks. — A  foreign  branch  established  by  a  National  bank 
is  not  an  independent  corporation,  and  the  creditors  of  the  branch  are 


305 

general  creditors  of  the  parent  bank.     (Opinion  of  Counsel  of  Board, 
Feb.  8,  1917.) 

Real  Estate  Loans  by  Foreign  Bbanches. — A  branch  bank  of  a 
National  bank  established  in  a  foreign  country,  under  authority  of 
Section  25,  may  make  loans  on  real  estate  located  within  100  miles  of 
the  branch,  provided  such  loans  conform  in  all  other  respects  to  the 
provisions  of  Section  24.  (Opinion  of  Counsel  of  Board,  Nov.  17, 
a917.) 

Reserves  of  Foreign  Branches. — Section  19  of  the  Federal  Reserve 
Act,  which  prescribes  reserves  to  be  carried  by  member  banks,  does 
not  apply  to  foreign  branches  of  National  banks;  but,  under  the 
special  power  vested  in  the  Federal  Reserve  Board  by  Section  25  to 
prescribe  conditions  and  regulations  under  which  foreign  branches 
may  be  established,  it  is  authorized  to  prescribe  the  amount,  character, 
and  location  of  reserve  to  be  maintained  against  deposits  received  in 
such  branches.     (Opinion  of  Counsel  of  Board,  October  7j  1918.) 

§  292.  Power  of  National  Banks  to  Take  Stock  in  Corporations 
Transacting  Foreign  Business. — Second.  To  invest  an  amount 
not  exceeding  in  the  aggregate  ten  per  centum,  of  its  paid-in 
capital  stock  and  surplus  in  the  stock  of  one  or  more  banks  or 
corporations  chartered  or  incorporated  under  the  laws  of  the  United 
States  or  of  any  State  thereof,  and  principally  engaged  in  inter- 
national or  foreign  banking,  or  banking  in  a  dependency  or  insular 
possession  of  the  United  States  either  directly  or  through  the 
agency,  ownership,  or  control  of  local  institutions  in  foreign  coun- 
tries, or  in  such  dependencies  or  insular  possessions: 

Until  January  1,  1921,  any  National  banking  association,  with- 
out regard  to  the  amount  of  its  capital  and  surplus,  may  file  ap- 
plication with  the  Federal  Reserve  Board  for  permission,  upon  such 
conditions  and  under  such  regulations  as  may  be  prescribed  by  said 
board,  to  invest  an  amount  not  exceeding  in  the  aggregate  five 
per  centum  of  its  paid-in  capital  and  surplus  in  the  stock  of  one 
or  more  corporations  chartered  or  incorporated  under  the  laws  of 
the  United  States  or  of  any  State  thereof  and,  regardless  of  its  loca- 
tion, principally  engaged  in  such  phases  of  international  or  for- 
eign financial  operations  as  may  be  necessary  to  facilitate  the  ex- 
port of  goods,  wares,  or  merchandise  from  the  United  States  or 
20 


306 

any  of  its  dependencies  or  insular  possessions  to  any  foreign  coun- 
try: Provided,  however,  That  in  no  event  shall  the  total  invest- 
ments authorized  by  this  section  by  any  one  National  Bank  exceed 
ten  per  centum  of  its  capital  and  surplus. 

Such  application  shall  specify  the  name  and  capital  of  the 
banking  association  filing  it,  the  powers  applied  for,  and  the 
place  or  places  where  the  banking  or  financial  operations  proposed 
are  to  be  carried  on.  The  Federal  Eeserve  Board  shall  have 
power  to  approve  or  to  reject  such  application  in  whole  or  in  part 
if  for  any  reason  the  granting  of  such  application  is  deemed  in- 
expedient, and  shall  also  have  power  from  time  to  time  to  increase 
or  decrease  the  number  of  places  where  such  banking  operations 
may  be  carried  on.  (Sec.  25,  Act  Dec.  23,  1913,  as  amended  by 
Act  Sept.  7,  1916,  and  further  by  Act,  Sept.  17,  1919;  41  Stat. 
L.,  -.) 

§  293.  Reports  and  Examination  of  Foreign  Branches,  Etc. — 
Every  National  banking  association  operating  foreign  branches 
shall  be  required  to  furnish  information  concerning  the  condition 
of  such  branches  to  the  Comptroller  of  the  Currency  upon  de- 
mand, and  every  member  bank  investing  in  the  capital  stock  of 
banks  or  corporations  described  above  shall  be  required  to  fur- 
nish information  concerning  the  condition  of  such  banks  or  cor- 
porations to  the  Federal  Reserve  Board  upon  demand,  and  the 
Federal  Eeserve  Board  may  order  special  examinations  of  the  said 
branches,  banks,  or  corporations  at  such  time  or  times  as  it  may 
deem  best.  (Sec.  25,  Act  Dec.  23,  1913,  as  amended  by  Act 
Sept.  7,  1916,  and  further  by  Act  Sept.  17,  1919;  41  Stat.  L.,  — .) 

§  294.  Powers  of  Board  Over  Corporations  in  Which  National 
Banks  Own  Stock. — Before  any  National  bank  shall  be  permit- 
ted to  purchase  stock  in  any  such  corporation  the  said  corporation 
shall  enter  into  an  agreement  or  undertaking  with  the  Federal 
Eeserve  Board  to  restrict  its  operations  or  conduct  its  business  in 
such  manner  or  under  such  limitations  and  restrictions  as  the 
said  board  may  prescribe  for  the  place  or  places  wherein  such 
business  is  to  be  conducted.    If  at  any  time  the  Federal  Eeserve 


307 

Board  shall  ascertain  that  the  regulations  prescribed  by  it  are  not 
being  complied  with,  said  board  is  hereby  authorized  and  em- 
powered to  institute  an  investigation  of  the  matter  and  to  send 
for  persons  and  papers,  subpoena  witnesses,  and  administer  oaths 
in  order  to  satisfy  itself  as  to  the  actual  nature  of  the  transactions 
referred  to.  Should  such  investigation  result  in  establishing  the 
failure  of  the  corporation  in  question,  or  of  the  National  bank 
or  banks  which  may  be  stockholders  therein,  to  comply  with  the 
regulations  laid  down  by  the  said  Federal  Reserve  Board,  such 
National  banks  may  be  required  to  dispose  of  stock  holdings  in 
the  said  corporation  upon  reasonable  notice.  (Sec.  25,  Act  Dec. 
23,  1913,  as  amended  by  Act  Sept.  7,  1916 ;  39  Stat.  L.,  755.) 

§  295.  Accounts  of  Foreign  Branches. —  Every  such  National 
banking  association  shall  conduct  the  accounts  of  each  foreign 
branch  independently  of  the  accounts  of  other  foreign  branches 
established  by  it  and  of  its  home  office,  and  shall  at  the  end  of 
each  fiscal  period  transfer  to  its  general  ledger  the  profit  or  loss 
accrued  at  each  branch  as  a  separate  item.  (Sec.  25,  Act  Dec.  23, 
1913,  as  amended  by  Act  Sept.  7,  1916;  39  Stat.  L.,  756.) 

§  296.  Exception  to  Prohibitions  of  Clayton  Act.— Any  di- 
rector or  other  officer,  agent,  or  employee  of  any  member  bank 
may,  with  the  approval  of  the  Federal  Reserve  Board,  be  a  director 
or  other  officer,  agent,  or  employee  of  any  such  bank  or  corporation 
above  mentioned  in  the  capital  stock  of  which  such  member  bank 
shall  have  invested  as  hereinbefore  provided,  without  being  subject 
to  the  provisions  of  section  eight  of  the  Act  approved  October 
fifteenth,  nineteen  hundred  and  fourteen,  entitled  "An  Act  to  sup- 
plement existing  laws  against  unlawful  restraints  and  monopolies, 
and  for  other  purposes."  (Sec.  25,  Act  Dec.  23,  1913,  as  amended 
by  Act  Sept.  7,  1916 ;  39  Stat.  L.,  756.) 

§  297.  Banking  Corporations  Authorized  to  do  Foreign  Bank- 
ing Business  (the  Edge  Bill).— Sec.  25  (a).  Corporations  to  be 
organized  for  the  purpose  of  engaging  in  international  or  foreign 
banking  or  other  international  or  foreign  financial  operations,  or 


308 

in  banking  or  other  financial  operations  in  a  dependency  or  in- 
sular possession  of  the  United  States,  either  directly  or  through 
the  agency,  ownership,  or  control  of  local  institutions  in  foreign 
countries,  or  in  such  dependencies  or  insular  possessions  as  pro- 
vided by  this  section,  and  to  act  when  required  by  the  Secretary 
of  the  Treasury  as  fiscal  agents  of  the  United  States,  may  be 
formed  by  any  number  of  natural  persons,  not  less  in  any  case 
than  five. 

Such  persons  shall  enter  into  articles  of  association  which  shall 
specify  in  general  terms  the  objects  for  which  the  association  is 
formed  and  may  contain  any  other  provisions  not  inconsistent 
with  law  which  the  association  may  see  fit  to  adopt  for  the  regula- 
tion of  its  business  and  the  conduct  of  its  affairs. 

Such  articles  of  association  shall  be  signed  by  all  of  the  persons 
intending  to  participate  in  the  organization  of  the  corporation  and, 
thereafter,  shall  be  forwarded  to  the  Federal  Reserve  Board  and 
shall  be  filed  and  preserved  in  its  office.  The  persons  signing  the 
said  articles  of  association  shall,  under  their  hands,  make  an  or- 
ganization certificate  which  shall  specifically  state: 

First.  The  name  assumed  by  such  corporation,  which  shall  be 
subject  to  the  approval  of  the  Federal  Eeserve  Board. 

Second.  The  place  or  places  where  its  operations  are  to  be  car- 
ried on. 

Third.  The  place  in  the  United  States  where  its  home  office  is  to 
be  located. 

Fourth.  The  amount  of  its  capital  stock  and  the  number  of  shares 
into  which  the  same  shall  be  divided. 

Fifth.  The  names  and  places  of  business  or  residence  of  the  per- 
sons executing  the  certificate  and  the  number  of  shares  to  which 
each  has  subscribed. 

Sixth.  The  fact  that  the  certificate  is  made  to  enable  the  persons 
subscribing  the  same,  and  all  other  persons,  firms,  companies,  and 
corporations,  who  or  which  may  thereafter  subscribe  to  or  purchase 
diares  of  the  capital  stock  of  such  corporation,  to  avail  themselves 
of  the  advantages  of  this  section. 

The  persons  signing  the  organization  certificate  shall  duly  ac- 
knowledge the  execution  thereof  before  a  judge  of  some  court  of 


309 

record  or  notary  public,  who  shall  certify  thereto  under  the  seal  of 
such  court  or  notary,  and  thereafter  the  certificate  shall  be  for- 
warded to  the  Federal  Reserve  Board  to  be  filed  and  preserved  in 
its  office.  Upon  duly  making  and  filing  articles  of  association 
and  an  organization  certificate,  and  after  the  Federal  Eeserve 
Board  has  approved  the  same  and  issued  a  permit  to  begin  busi- 
ness, the  association  shall  become  and  be  a  body  corporate,  and  as 
such  and  in  the  name  designated  therein  shall  have  power  to  adopt 
and  use  a  corporate  seal,  which  may  be  changed  at  the  pleasure  of 
its  board  of  directors;  to  have  succession  for  a  period  of  twenty 
years  unless  sooner  dissolved  by  the  act  of  the  shareholders  own- 
ing two-thirds  of  the  stock  or  by  an  Act  of  Congress  or  unless  its 
franchises  become  forfeited  by  some  violation  of  law ;  to  make  con- 
tracts; to  sue  and  be  sued,  complain,  and  defend  in  any  court  of 
law  or  equity;  to  elect  or  appoint  directors,  all  of  whom  shall 
be  citizens  of  the  United  States;  and,  by  its  board  of  directors,  to 
appoint  such  officers  and  employees  as  may  be  deemed  proper, 
define  their  authority  and  duties,  require  bonds  of  them,  and  fix 
the  penalty  thereof,  dismiss  such  officers  or  employees,  or  any 
thereof,  at  pleasure  and  appoint  others  to  fill  their  places;  to  pre- 
scribe, by  its  board  of  directors,  by-laws  not  inconsistent  with  law 
or  with  the  regulations  of  the  Federal  Eeserve  Board  regulating 
the  manner  in  which  its  stock  shall  be  transferred,  its  directors 
elected  or  appointed,  its  officers  and  employees  appointed,  its  prop- 
erty transferred,  and  the  privileges  granted  to  it  by  law  exercised 
and  enjoyed. 

Each  corporation  so  organized  shall  have  power,  under  such  rules 
and  regulations  as  the  Federal  Eeserve  Board  may  prescribe: 

(a)  To  purchase,  sell,  discount,  and  negotiate,  with  or  without 
its  indorsement  or  guaranty,  notes,  drafts,  checks,  bills  of  ex- 
change, acceptances,  including  bankers'  acceptances,  cable  trans- 
fers, and  other  evidences  of  indebtedness;  to  purchase  and  sell, 
with  or  without  its  indorsement  or  guaranty,  securities,  including 
the  obligations  of  the  United  States  or  of  any  State  thereof,  but 
not  including  shares  of  stock  in  any  corporation  except  as  herein 
provided;  to  accept  bills  or  drafts  drawn  upon  it  subject  to  such 
limitations  and  restrictions  as  the  Federal  Eeserve  Board  may  im- 


310 

pose;  to  issue  letters  of  credit;  to  purchase  and  sell  coin,  bullion, 
and  exchange;  to  borrow  and  to  lend  money;  to  issue  debentures, 
bonds,  and  promissory  notes  under  such  general  conditions  as  to 
security  and  such  limitations  as  the  Federal  Eescrve  Board  may 
prescribe,  but  in  no  event  having  liabilities  outstanding  thereon 
at  any  one  time  exceeding  ten  times  its  capital  stock  and  surplus ; 
to  receive  deposits  outside  of  the  United  States  and  to  receive 
only  such  deposits  within  the  United  States  as  may  be  incidental 
to  or  for  the  purpose  of  carrying  out  transactions  in  foreign  coun- 
tries or  dependencies  or  insular  possessions  of  the  United  States; 
and  generally  to  exercise  such  powers  as  are  incidental  to  the 
powers  conferred  by  this  Act  or  as  may  be  usual,  in  the  determina- 
tion of  the  Federal  Eeserve  Board,  in  connection  with  the  trans- 
action of  the  business  of  banking  or  other  financial  operations  in 
the  countries,  colonies,  dependencies,  or  possessions  in  which  it 
shall  transact  business  and  not  inconsistent  with  the  powers  spe- 
cifically granted  herein.  Nothing  contained  in  this  section  shall 
be  construed  to  prohibit  the  Federal  Eeserve  Board,  under  its 
power  to  prescribe  rules  and  regulations,  from  limiting  the  ag- 
gregate amount  of  liabilities  of  any  or  all  classes  incurred  by  the 
corporation  and  outstanding  at  any  one  time.  Whenever  a  cor- 
poration organized  under  this  section  receives  deposits  in  the 
United  States  authorized  by  this  section  it  shall  carry  reserves 
in  such  amounts  as  the  Federal  Eeserve  Board  may  prescribe,  but 
in  no  event  less  than  ten  per  centum  of  its  deposits. 

(b)  To  establish  and  maintain  for  the  transaction  of  its  busi- 
ness branches  or  agencies  in  foreign  countries,  their  dependencies 
or  colonies,  and  in  the  dependencies  or  insular  possessions  of  the 
United  States,  at  such  places  as  may  be  approved  by  the  Federal 
Eeserve  Board  and  under  such  rules  and  regulations  as  it  may 
prescribe,  including  countries  or  dependencies  not  specified  in  the 
original  organization  certificate. 

(c)  With  the  consent  of  the  Federal  Eeserve  Board  to  purchase 
and  hold  stock  or  other  certificates  of  ownership  in  any  other  cor- 
poration organized  under  the  provisions  of  this  section,  or  under 
the  laws  of  any  foreign  country  or  a  colony  or  dependency  thereof, 
or  under  the  laws  of  any  State,  dependency,  or  insular  possession 


311 

of  the  United  States,  but  not  engaged  in  the  general  business  of 
buying  or  selling  goods,  wares,  merchandise  or  commodities  in 
the  United  States,  and  not  transacting  any  business  in  the  United 
States  except  such  as  in  the  judgment  of  the  Federal  Reserve 
Board  may  be  incidental  to  its  international  or  foreign  business: 
Provided,  however,  That,  except  with  the  approval  of  the  Federal 
Eeserve  Board,  no  corporation  organized  hereunder  shall  invest 
in  any  one  corporation  an  amount  in  excess  of  ten  per  centum  of 
its  own  capital  and  surplus,  except  in  a  corporation  engaged  in 
the  business  of  banking,  when  fifteen  per  centum  of  its  capital 
and  surplus  may  be  so  invested:  Provided  further,  That  no  cor- 
poration organized  hereunder  shall  purchase,  own,  or  hold  stock 
or  certificates  of  ownership  in  any  otker  corporation  organized 
hereunder  or  under  the  laws  of  any  State  which  is  in  substantial 
competition  therewith,  or  which  holds  stock  or  certificates  of  own- 
ership in  corporations  which  are  in  substantial  competition  with 
the  purchasing  corporation. 

Nothing  contained  herein  shall  prevent  corporations  organized 
hereunder  from  purchasing  and  holding  stock  in  any  corporation 
where  such  purchase  shall  be  necessary  to  prevent  a  loss  upon  a 
debt  previously  contracted  in  good  faith;  and  stocks  so  purchased 
or  acquired  in  corporations  organized  under  this  section  shall 
within  six  months  from  such  purchase  be  sold  or  disposed  of  at 
public  or  private  sale  unless  the  time  to  so  dispose  of  same  is 
extended  by  the  Federal  Eeserve  Board. 

No  corporation  organized  under  this  section  shall  carry  on  any 
part  of  its  business  in  the  United  States  except  such  as,  in  the 
judgment  of  the  Federal  Reserve  Board,  shall  be  incidental  to  its 
international  or  foreign  business:  And  provided  further,  That 
except  such  as  is  incidental  and  preliminary  to  its  organization 
no  such  corporation  shall  exercise  any  of  the  powers  conferred  by 
this  section  until  it  has  been  duly  authorized  by  the  Federal  Re- 
serve Board  to  commence  business  as  a  corporation  organized  un- 
der the  provisions  of  this  section. 

No  corporation  organized  under  this  section  shall  engage  in 
commerce  or  trade  in  commodities  except  as  specifically  provided 
in  this  section,  nor  shall  it  either  directly  or  indirectly  control  or 


312 

fix  or  attempt  to  control  or  fix  the  price  of  any  such  commodi- 
ties. The  charter  of  any  corporation  violating  this  provision  shall 
be  subject  to  forfeiture  in  the  manner  hereinafter  provided  in  this 
section.  It  shall  be  unlawful  for  any  director,  officer,  agent,  or 
employee  of  any  such  corporation  to  use  or  to  conspire  to  use 
the  credit,  the  funds,  or  the  power  of  the  corporation  to  fix  or 
control  the  price  of  any  such  commodities,  and  any  such  person 
violating  this  provision  shall  be  liable  to  a  fine  of  not  less  than 
$1,000  and  not  exceeding  $5,000  or  imprisonment  not  less  than 
one  year  and  not  exceeding  five  years,  or  both,  in  the  discretion 
of  the  court. 

No  corporation  shall  be  organized  under  the  provisions  of  this 
section  with  a  capital  stock  of  less  than  $2,000,000,  one-quarter 
of  which  must  be  paid  in  before  the  corporation  may  be  author- 
ized to  begin  business,  and  the  remainder  of  the  capital  stock  of 
such  corporation  shall  be  paid  in  installments  of  at  least  ten  per 
centum  on  the  whole  amount  to  which  the  corporation  shall  be 
limited  as  frequently  as  one  installment  at  the  end  of  each  suc- 
ceeding two  months  from  the  time  of  the  commencement  of  its 
business  operations  until  the  whole  of  the  capital  stock  shall  be 
paid  in.  The  capital  stock  of  any  such  corporation  may  be  in- 
creased at  any  time,  with  the  approval  of  the  Federal  Reserve 
Eoard,  by  a  vote  of  two-thirds  of  its  shareholders  or  by  unani- 
mous consent  in  writing  of  the  shareholders  without  a  meeting 
and  without  a  formal  vote,  but  any  such  increase  of  capital  shall 
be  fully  paid  in  within  ninety  days  after  such  approval;  and  may 
be  reduced  in  like  manner,  provided  that  in  no  event  shall  it  be 
less  than  $2,000,000.  No  corporation,  except  as  herein  provided, 
shall  during  the  time  it  shall  continue  its  operations  withdraw  or 
permit  to  be  withdrawn,  either  in  the  form  of  dividends  or  other- 
wise, any  portion  of  its  capital.  Any  National  banking  associa- 
tion may  invest  in  the  stock  of  any  corporation  organized  under 
the  provisions  of  this  section,  but  the  aggregate  amount  of  stock 
held  in  all  corporations  engaged  in  business  of  the  kind  described' 
in  this  section  and  in  section  twenty-five  of  the  Federal  Reserve 
Act  as  amended  shall  not  exceed  ten  per  centum  of  the  subscrib- 
ing bank's  capital  and  surplus. 


313 

A  majority  of  the  shares  of  the  capital  stock  of  any  such  cor- 
poration shall  at  all  times  be  held  and  owned  by  citizens  of  the 
United  States,  by  corporations  the  controlling  interest  in  which  is 
owned  by  citizens  of  the  United  States,  chartered  under  the  laws 
of  the  United  States  or  of  a  State  of  the  United  States,  or  by 
firms  or  companies,  the  controlling  interest  in  which  is  owned  by 
citizens  of  the  United  States.  The  provisions  of  section  eight  of 
the  act  approved  October  15,  1914,  entitled  "An  Act  to  supple- 
ment existing  laws  against  unlawful  restraints  and  monopolies, 
and  for  other  purposes,  as  amended  by  the  Acts  of  May  15,  1916, 
and  September  7,  1916,  shall  be  construed  to  apply  to  the  direc- 
tors, other  officers,  agents,  or  employees  of  corporations  organized 
under  the  provisions  of  this  section:  Provided,  however,  That 
nothing  herein  contained  shall  (1)  prohibit  any  director  or  other 
officer,  agent  or  employee  of  any  member  bank,  who  has  procured 
the  approval  of  the  Federal  Eeserve  Board  from  serving  at  the 
same  time  as  director  or  other  officer,  agent  or  employee  of  any 
corporation  organized  under  the  provisions  of  this  section  in  whose 
capital  stock  such  member  bank  shall  have  invested;  or  (2)  pro- 
hibit any  director  or  other  officer,  agent,  or  employee  of  any  cor- 
poration organized  under  the  provisions  of  this  section,  who  has 
procured  the  approval  of  the  Federal  Eeserve  Board,  from  serving 
at  the  same  time  as  a  director  or  other  officer,  agent  or  employee 
of  any  corporation  in  whose  capital  stock  such  first-mentioned 
corporation  shall  have  invested  under  the  provisions  of  this  section. 

No  member  of  the  Federal  Eeserve  Board  shall  be  an  officer  or 
director  of  any  corporation  organized  under  the  provisions  of  this 
section,  or  of  any  corporation  engaged  in  similar  business  organ- 
ized under  the  laws  of  any  State,  nor  hold  stock  in  any  such 
corporation,  and  before  entering  upon  his  duties  as  a  member  of 
the  Federal  Eeserve  Board  he  shall  certify  under  oath  to  the  Sec- 
retary of  the  Treasury  that  he  has  complied  with  this  requirement. 

Shareholders  in  any  corporation  organized  under  the  provisions 
of  this  section  shall  be  liable  for  the  amount  of  their  unpaid  stock 
subscriptions.  No  such  corporation  shall  become  a  member  of  any 
Federal  reserve  bank. 

Should  any  corporation  organized  hereunder  violate  or  fail  to 


314 

comply  with  any  of  the  provisions  of  this  section,  all  of  its  rights, 
privileges,  and  franchises  derived  herefrom  may  thereby  be  for- 
feited. Before  any  such  corporation  shall  be  declared  dissolved, 
or  its  rights,  privileges,  and  franchises  forfeited,  any  noncompli- 
ance with,  or  violation  of  such  laws  shall,  however,  be  determined 
and  adjudged  by  a  court  of  the  United  States  of  competent  juris- 
diction, in  a  suit  brought  for  that  purpose  in  the  district  or  ter- 
ritory in  which  the  home  office  of  such  corporation  is  located, 
which  suit  shall  be  brought  by  the  United  States  at  the  instance 
of  the  Federal  Eeserve  Board  or  the  Attorney  General.  Upon 
adjudication  of  such  noncompliance  or  violation,  each  director 
and  officer  who  participated  in,  or  assented  to,  the  illegal  act  or 
acts,  shall  be  liable  in  his  personal  or  individual  capacity  for  all 
damages  which  the  said  corporation  shall  have  sustained  in  con- 
sequence thereof.  No  dissolution  shall  take  away  or  impair  any 
remedy  against  the  corporation,  its  stockholders,  or  officers  for 
any  liability  or  penalty  previously  incurred. 

Any  such  corporation  may  go  into  voluntary  liquidation  and 
be  closed  by  a  vote  of  its  shareholders  owning  two-thirds  of  its  stock. 

Whenever  the  Federal  Eeserve  Board  shall  become  satisfied  of 
the  insolvency  of  any  such  corporation,  it  may  appoint  a  receiver 
who  shall  take  possession  of  all  of  the  property  and  assets  of  the 
corporation  and  exercise  the  same  rights,  privileges,  powers,  and 
authority  with  respect  thereto  as  are  now  exercised  by  receivers 
of  National  banks  appointed  by  the  Comptroller  of  the  Currency 
of  the  United  States:  Provided,  liowever,  That  the  assets  of  the 
corporation  subject  to  the  laws  of  other  countries  or  jurisdictions 
shall  be  dealt  with  in  accordance  with  the  terms  of  such  laws. 

Every  corporation  organized  under  the  provisions  of  this  section 
shall  hold  a  meeting  of  its  stockholders  annually  upon  a  date  fixed 
in  its  by-laws,  such  meeting  to  be  held  at  its  home  office  in  the 
United  States.  Every  such  corporation  shall  keep  at  its  home 
office  books  containing  the  names  of  all  stockholders  thereof,  and 
the  names  and  addresses  of  the  members  of  its  board  of  directors, 
together  with  copies  of  all  reports  made  by  it  to  the  Federal  Ee- 
serve Board.  Every  such  corporation  shall  make  reports  to  the 
Federal  Eeserve  Board  at  such  times  and  in  such  form  as  it  may 


315 

require;  and  shall  be  subject  to  examination  once  a  year  and  at 
such  other  times  as  may  be  deemed  necessary  by  the  Federal  Re- 
serve Board  by  examiners  appointed  by  the  Federal  Eeserve  Board, 
the  cost  of  such  examinations,  including  the  compensation  of  the 
examiners,  to  be  fixed  by  the  Federal  Eeserve  Board  and  to  be 
paid  by  the  corporation  examined. 

The  directors  of  any  corporation  organized  under  the  provisions 
of  this  section  may,  semiannually,  declare  a  dividend  of  so  much  of 
the  net  profits  of  the  corporation  as  they  shall  judge  expedient; 
but  each  corporation  shall,  before  the  declaration  of  a  dividend, 
carry  one-tenth  of  its  net  profits  of  the  preceding  half  year  to  its 
surplus  fund  until  the  same  shall  amount  to  twenty  per  centum 
of  its  capital  stock. 

Any  corporation  organized  under  the  provisions  of  this  section 
shall  be  subject  to  tax  by  the  State  within  which  its  home  office  is 
located  in  the  same  manner  and  to  the  same  extent  as  other  cor- 
porations organized  under  the  laws  of  that  State  which  are  trans- 
acting a  similar  character  of  business.  The  shares  of  stock  in 
such  corporation  shall  also  be  subject  to  tax  as  the  personal  prop- 
erty of  the  owners  or  holders  thereof  in  the  same  manner  and  to 
the  same  extent  as  the  shares  of  stock  in  similar  State  corporations. 

Any  corporation  organized  under  the  provisions  of  this  section 
may  at  any  time  within  the  two  years  next  previous  to  the  date  of 
the  expiration  of  its  corporate  existence,  by  a  vote  of  the  share- 
holders owning  two-thirds  of  its  stock,  apply  to  the  Federal  Eeserve 
Board  for  its  approval  to  extend  the  period  of  its  corporate  exist- 
ence for  a  term  of  not  more  than  twenty  years,  and  upon  certified 
approval  of  the  Federal  Eeserve  Board  such  corporation  shall  have 
its  corporate  existence  for  such  extended  period  unless  sooner  dis- 
solved by  the  act  of  the  shareholders  owning  two-thirds  of  its 
stock,  or  by  an  Act  of  Congress  or  unless  its  franchise  becomes 
forfeited  by  some  violation  of  law. 

Any  bank  or  banking  institution,  principally  engaged  in  foreign 
business,  incorporated  by  special  law  of  any  State  or  of  the  United 
States  or  organized  under  the  general  laws  of  any  State  or  of  the 
United  States  and  having  an  unimpaired  capital  sufficient  to  en- 
title it  to  become  a  corporation  under  the  provisions  of  this  sec- 


31G 

tion  ma}',  by  the  vote  of  the  shareholders  owning  not  less  than 
two-thirds  of  the  capital  stock  of  such  bank  or  banking  associa- 
tion, with  the  approval  of  the  Federal  Reserve  Board,  be  con- 
verted into  a  Federal  corporation  of  the  kind  authorized  by  this 
section  with  any  name  approved  by  the  Federal  Reserve  Board : 
Provided,  however,  That  said  conversion  shall  not  be  in  contra- 
vention of  the  State  law.  In  such  case  the  articles  of  association 
and  organization  certificate  may  be  executed  by  a  majority  of  the 
directors  of  the  bank  or  banking  institution,  and  the  certificate 
shall  declare  that  the  owners  of  at  least  two-thirds  of  the  capital 
stock  have  authorized  the  directors  to  make  such  certificate  and 
to  change  or  convert  the  bank  or  banking  institution  into  a  Fed- 
eral corporation.  A  majority  of  the  directors,  after  executing 
the  articles  of  association  and  the  organization  certificate,  shall 
have  power  to  execute  all  other  papers  and  to  do  whatever  may 
be  required  to  make  its  organization  perfect  and  complete  as  a 
Federal  corporation.  The  shares  of  any  such  corporation  may 
continue  to  be  for  the  same  amount  each  as  they  were  before  the 
conversion,  and  the  directors  may  continue  to  be  directors  of  the 
corporation  until  others  are  elected  or  appointed  in  accordance 
with  the  provisions  of  this  section.  When  the  Federal  Reserve 
Board  has  given  to  such  corporation  a  certificate  that  the  pro- 
visions of  this  section  have  been  complied  with,  such  corporation 
and  all  its  stockholders,  officers,  and  employees,  shall  have  the 
same  powers  and  privileges,  and  shall  be  subject  to  the  same  du- 
ties, liabilities,  and  regulations,  in  all  respects,  as  shall  have  been 
prescribed  by  this  section  for  corporations  originally  organized 
hereunder. 

Every  officer,  director,  clerk,  employee,  or  agent  of  any  cor- 
poration organized  under  this  section  who  embezzles,  abstracts,  op 
willfully  misapplies  any  of  the  moneys,  funds,  credits,  securities, 
evidences  of  indebtedness  or  assets  of  any  character  of  such  cor- 
poration; or  who,  without  authority  from  the  directors,  issues  or 
puts  forth  any  certificate  of  deposit,  draws  any  order  or  bill  of 
exchange,  makes  any  acceptance,  assigns  any  note,  bond,  debenture, 
draft,  bill  of  exchange,  mortgage,  judgment,  or  decree;  or  who 
makes  any  false  entry  in  any  book,  report,  or  statement  of  such 


317 

corporation  with  intent,  in  either  case,  to  injure  or  defraud  such 
corporation  or  any  other  company,  body  politic  or  corporate,  or 
any  individual  person,  or  to  deceive  any  officer  of  such  corpora- 
tion, the  Federal  Reserve  Board,  or  any  agent  or  examiner  ap- 
pointed to  examine  the  affairs  of  any  such  corporation;  and  every 
receiver  of  any  such  corporation  and  every  clerk  or  employee  of 
such  receiver  who  shall  embezzle,  abstract,  or  willfully  misapply 
or  wrongfully  convert  to  his  own  use  any  moneys,  funds,  credits, 
or  assets  of  any  character  which  may  come  into  his  possession  or 
under  his  control  in  the  execution  of  his  trust  or  the  performance 
of  the  duties  of  his  employment;  and  every  such  receiver  or  clerk 
or  employee  of  such  receiver  who  shall,  with  intent  to  injure  or 
defraud  any  person,  body  politic  or  corporate,  or  to  deceive  or 
mislead  the  Federal  Reserve  Board,  or  any  agent  or  examiner  ap- 
pointed to  examine  the  affairs  of  such  receiver,  shall  make  any 
false  entry  in  any  book,  report,  or  record  of  any  matter  con- 
nected with  the  duties  of  such  receiver;  and  every  person  who 
with  like  intent  aids  or  abets  any  officer,  director,  clerk,  employee, 
or  agent  of  any  corporation  organized  under  this  section,  or  re- 
ceiver or  clerk  or  employee  of  such  receiver  as  aforesaid  in  any 
violation  of  this  section,  shall  upon  conviction  thereof  be  impris- 
oned for  not  less  than  two  years  nor  more  than  ten  years,  and  may 
also  be  fined  not  more  than  $5,000,  in  the  discretion  of  the  court. 
Whoever  being  connected  in  any  capacity  with  any  corporation 
organized  under  this  section  represents  in  any  way  that  the  United 
States  is  liable  for  the  payment  of  any  bond  or  other  obligation, 
or  the  interest  thereon,  issued  or  incurred  by  any  corporation  or- 
ganized hereunder,  or  that  the  United  States  incurs  any  liability 
in  respect  of  any  act  or  omission  of  the  corporation,  shall  be  pun- 
ished by  a  fine  of  not  more  than  $10,000  and  by  imprisonment 
for  not  more  than  five  years.  (Act  approved  December  24,  1919 ; 
41  Stat.  L.,  — .) 


318 

REGULATION  K  OF  FEDEEAL  RESERVE  BOAED. 
(Series  of  1920.) 

T.     Organization. 

Any  number  of  natural  persons,  not  less  in  any  case  than  five,  may 
form  a  Corporation  *  under  the  provisions  of  Section  25  (a)  for  the 
purpose  of  engaging  in  international  or  foreign  banking  or  other  in- 
ternational or  foreign  financial  operations  or  in  banking  or  other 
financial  operations  in  a  dependency  or  insular  possession  of  the  United 
States  either  directly  or  through  the'  agency,  ownership,  or  control 
of  local  institutions  in  foreign  countries  or  in  such  dependencies 
or  insular  possessions. 

II.  Articles  of  Association. 
Any  persons  desiring  to  organize  a  corporation  for  any  of  the  pur- 
poses defined  in  Section  25  (a)  shall  enter  into  articles  of  association' 
(see  Federal  Reserve  Board  Form  151  which  is  suggested  as  a  satis- 
factory form  of  articles  of  association)  which  shall  specify  in,  general 
terms  the  objects  for  which  the  Corporation  is  formed,  and  may 
contain  any  other  provisions  not  inconsistent  with  law  which  the 
Corporation  may  see  fit  to  adopt  for  the  regulation  of  its  business 
and  the  conduct  of  its  affairs.  The  articles  of  association  shall  be 
signed  by  each  person  intending  to  participate  in  the  organization 
of  the  Corporation  and  when  signed  shall  be  forwarded  to  the  Federal 
Reserve  Board  in  whose  office  they  shall  be  filed. 

III.    Organization  Certificate. 

All  of  the  persons  signing  the  articles  of  association  shall  under 
their  hands  make  an  organization  certificate  (Federal  Reserve  Board 
Form  152)   which  shall  state  specifically: 

First.     The  name  assumed  by  the  Corporation. 

Second.  The  place  or  places  where  its  operations  are  to  be  car- 
ried on. 

Third.  The  place  in  the  United  States  where  its  home  office  is  to 
be  located. 

Fourth.  The  amount  of  its  capital  stock  and  the  number  of  shares 
into  which  it  shall  be  divided. 

Fifth.  The  names  and  places  of  business  or  residences  of  persons 
executing  the  organization  certificate  and  the  number  of  shares  to 
which  each  has  subscribed. 

*  Whenever  these  regulations  refer  to  a  Corporation  spelled  with  a 
capital  C,  they  relate  to  a  corporation  organized  under  Section  25  (a) 
of  the  Federal  Reserve  Act. 


319 

Sixth.  The  fact  that  the  certificate  is  made  to  enable  the  persons 
subscribing  the  same  and  all  other  persons,  firms,  companies,  and 
corporations  who  or  which  may  thereafter  subscribe  to  or  purchase 
shares  of  the  capital  stock  of  such  Corporation  to  avail  themselves  of 
the  advantages  of  this  section. 

The  persons  signing  the  organization  certificate  shall  acknowledge 
the  execution  thereof  before  a  judge  of  some  court  of  record  or  notary- 
public  who  shall  certify  thereto  under  the  seal  of  such  court  or 
notary.  Thereafter  the  certificate  shall  be  forwarded  to  the  Federal 
Reserve  Board  to  be  filed  in  its  office. 

IV.     Title. 

Inasmuch  as  the  name  ot  the  Corporation  is  subject  to  the  approval 
of  the  Federal  Reserve  Board,  a  preliminary  application  for  that  ap- 
proval should  be  filed  with  the  Federal  Reserve  Board  on  Federal 
Reserve  Board  Form  150.  This  application  should  state  merely  that 
the  organization  of  a  Corporation  under  the  proposed  name  is  con- 
templated and  may  request  the  approval  of  that  name  and  its  reserva- 
tion for  a  period  of  30  days.  No  Corporation  which  issues  its  own 
bonds,  debentures,  or  other  such  obligations  will  be  permitted  to  have 
the  word  "bank"  as  a  part  of  its  title.  No  Corporation  which  has 
the  word  "Federal"  in  its  title  will  be  permitted  also  to  have  the 
word  "bank"  as  a  part  of  its  title.  So  far  as  possible  the  title  of  the 
Corporation  should  indicate  the  nature  or  reason  of  the  business  con- 
templated and  should  in  no  case  resemble  the  name  of  any  other  cor- 
poration to  the  extent  that  it  might  result  in  misleading  or  deceiving 
the  public  as  to  its  identity,  purpose,  connections  or  affiliations. 

V.    Authority  to  Commence  Business. 

After  the  articles  of  association  and  organization  certificate  have 
been  made  and  filed  with  the  Federal  Reserve  Board,  and  after  they 
have  been  approved  by  the  Federal  Reserve  Board  and  a  preliminary 
permit  to  begin  business  has  been  issued  by  the  Federal  Reserve 
Board,  the  association  shall  become  and  be  a  body  corporate,  but 
none  of  Its  powers  except  such  as  are  incidental  and  preliminary  to 
its  organization  shall  be  exercised  until  it  has  been  formally  author- 
ized by  the  Federal  Reserve  Board  by  a  final  permit  generally  to 
commence  business. 

Before  the  Federal  Board  will  issue  its  final  permit  to  commence 
business,  the  president  o'r  cashier,  together  with  at  least  three  of  the 
directors,  must  certify  (a)  that  each  director  elected  is  a  citizen  of 
the  United  States;  (6)  that  a  majority  of  the  shares  of  stock  is  owned 
by  citizens  of  the  United  States,  by  corporations  the  controlling  in- 


320 

terest  in  which  is  owned  by  citizens  of  the  United  States,  chartered 
under  the  laws  of  the  United  States,  or  by  firms  or  companies  the 
controlling  interest  in  which  is  owned  by  citizens  of  the  United  States; 
and  (c)  that  of  the  authorized  capital  stock  specified  in  the  articles 
of  association  at  least  25  per  cent,  has  been  paid  in  in  cash  and  that 
each  shareholder  has  individually  paid  in  in  cash  at  least  25  per  cent, 
of  his  stock  subscription.  Thereafter  the  cashier  shall  certify  to  the 
payment  of  the  remaining  installments  as  and  when  each  is  paid  in, 
in  accordance  with  law. 

VI.    Capital  Stock. 

No  Corporation  may  be  organized  under  the  terms  of  Section  25  (a) 
with  a  capital  stock  of  less  than  $2,000,000.  The  par  value  of  e'ach 
share  of  stock  shall  be  specified  in  the  articles  of  association  and  no 
Corporation  will  be  permitted  to  issue  stock  of  no  par  value.  If 
there  is  more  than  one  class  of  stock  the  name  and  amount  of  each 
class  and  the  obligations,  rights,  and  privileges  attaching  thereto 
shall  be  set  forth  fully  In  the  articles  of  association.  Each  class  of 
stock  shall  be  so  named  as  to  Indicate  to  the  investor  as  nearly  as 
possible  what  is  its  character  and  to  put  him  on  notice  of  any  unusual 
attributes. 

VII.    Transfers  of  Stock. 

Section  25  (a)  provides  in  part  that — 

A  majority  of  the  shares  of  the  capital  stock  of  any  such  cor- 
poration shall  at  all  times  be  held  and  owned  by  the  citizens  of 
the    United    States,    by   corporations    the    controlling   interest   in 
which  is  owned  by  citizens  of  the  United  States,  chartered  under 
the  laws  of  the  United  States  or  of  a  State  of  the  United  States, 
or  by  firms  or  companies,   the   controlling   interest  in  which   is 
owned  by  citizens  of  the  United  States. 
In  order  to  insure  compliance  at  all  times  with  the  requirements 
of  this  provision  after  the  organization  of  the  Corporation,  shares  of 
stock  shall  be   issuable   and  transferable   only  on  the   books   of   the 
Corporation.     Every  application   for   the   issue   or   transfer  of  stock 
shall  be  accompanied  by  an  affidavit  of  the  party  to  whom,  it  is  desired 
to  issue  or  transfer  stock,  or  by  his  or  its  duly  authorized  agent, 
stating — 

In  the  case  of  an  individual. —  (a)  Whether  he  is  or  Is  not  a)  citizen 
of  the  United  States  and  if  a  citizen  of  the  United  States,  whether 
he  is  a  natural  born  citizen  or  a  citizen  by  naturalization,,  and  if 
naturalized,  whether  he  remains  for  any  purpose  in  the  allegiance 
of  any  foreign  sovereign  or  state;  (h)  Whether  there  is  or  is  not 
any  arrangement  under  which  he  is  to  hold  the  shares  or  any  of  the 
shares  which  he  desires  to  have  issued  or  transferred  to  him,  in  trust 


321 

for  or  in.  any  way  under  the  control  of  any  foreign  state  or  any 
foreigner,  foreign  corporation,  or  any  corporation  under  foreign  control, 
and  if  so,  the  nature  thereof. 

In  the  case  of  a  corporation. —  (a)  Whether  such  corporation  is  or 
is  not  chartered  under  the  laws  of  the  United  States  or  of  a  state  of 
the  United  States.  If  it  is  not,  no  further  declaration  is  necessary, 
but  if  it  is,  it  must  also  be  stated  (&)  whether  the  controlling  interest 
in  such  corporation  is  or  is  not  owned  by  citizens  of  the  United  States, 
and  (c)  whether  there  is  or  is  not  any  arrangement  under  which  such 
corporation  will  hold  the  shares  or  any  of  the  shares  if  issued  or 
transferred  to  such  corporation,  in  trust  for  or  in  any  way  under  the 
control  of  any  foreign  state  or  any  foreigner  or  foreign  corporation  or 
any  corporation  under  foreign  control,  and  if  so,  the  nature  thereof. 

In  the  case  of  a  firm-  or  company. —  (a)  Whether  the  controlling 
interest  in  such  firm  or  company  is  or  is  not  owned  by  citizens  of  the 
United  States  and,  if  so,  (b)  whether  there  is  or  is  not  any  arrange- 
ment under  which  such  firm  or  company  will  hold  the  shares  or  any 
of  the  shares  if  issued  or  transferred  to  such  firm  or  company  in 
trust  for  or  in  any  way  under  the  control  of  any  foreign  state  or  any 
foreigner  or  foreign  corporation  or  any  corporation  under  foreign 
control  and  if  so,  the  nature  thereof. 

The  board  of  directors  of  the  Corporation,  whether  acting  directly 
or  through  an  agent,  may,  before  making  any  issue  or  transfer  of 
stock,  require  such  further  evidence  as  in  their  discretion  they  may 
think  necessary  in  order  to  determine  whether  or  not  the  issue  or 
transfer  of  the  stock  would  result  in  a  violation  of  the  law.  No  issue 
or  transfer  of  stock  which  would  cause  50  per  cent,  or  more  of  the 
total  amount  of  stock  issued  or  outstanding  to  be  held  contrary  to 
the  provisions  of  the  law  or  these  regulations  shall  be  made  upon 
the  books  of  the  Corporation.  The  decision  of  the  board  of  directors 
in  each  case  shall  be  final  and  conclusive  and  not  subject  to  any 
question  by  any  person,  firm,  or  corporation  on  any  ground  whatsoever. 

If  at  any  time  by  reason  of  the  fact  that  the  holder  of  any  shares 
of  the  Corporation  ceases  to  be  a  citizen  of  the  United  States,  or, 
in  the  opinion  of  the  board  of  directors,  becomes  subject  to  the  control 
of  any  foreign  State  or  foreigner  or  foreign  corporation  or  corporation 
under  foreign  control,  50  per  cent,  or  more  of  the  total  amount  of 
capital  stock  issued  or  outstanding  is  held  contrary  to  the  provisions 
of  the  law  or  these  regulations,  the  board  of  directors  may,  when 
apprised  of  that  fact,  forthwith  serve  on  the  holder  of  the  shares  in 
question  a  notice  in  writing  requiring)  such  holder  within  two  months 
to  transfer  such  shares  to  a  citizen  of  the  United  States,  or  to  a 
firm,  company,  or  corporation  approved  by  the  board  of  directors  as  an 
eligible  stockholder.  When  such  notice  has  been  given  by  the  board 
of  directors  the  shares  of  stock  so  held  shall  cease  to  confer  any 
21 


322 

vote  until  they  have  been  transferred  as  required  above  and  if  on  the 
expiration  of  two  months  after  such  notice  the  shares  shall  not  have 
been  so  transferred,  the  shares  shall  be  forfeited  to  the  Corporation. 
The  board  of  directors  shall  prescribe  in  the  by-laws  of  the  Corpora- 
tion appropriate  regulations  for  the  registration  of  the  shares  of  stock 
in  accordance  with  the  terms  of  the  law  and  these  regulations.  The 
by-laws  must  also  provide  that  the  certificates  of  stock  issued  by 
the  Corporation  shall  contain  provisions  sufficient  to  put  the  holder 
on  notice*  of  the  terms  of  the  law  and  the  regulations  of  the  Federal 
Reserve  Board  defining  the  limitations  upon  the  rights  of  transfer. 

VIII.    Opebations  in  the  United  States. 

No  Corporation  shall  carry  on  any  part  of  its  business  in  the  United 
States  except  such  as  shall  be  incidental  to  its  international  or  foreign 
business.  Agencies  may  be  established  in  the  United  States  with 
the  approval  of  the  Federal  Reserve  Board  for  specific  purposes,  but 
not  generally  to  carry  on  the  business  of  the  Corporation. 

IX.    Investments  in  the  Stock  of  Othee  Corporations. 

It  is  contemplated  by  the  law  that  a  Corporation  shall  conduct  its 
business  abroad  either  directly  or  indirectly  through  the  ownership 
or  control  of  corporations,  and  it  is  accordingly  provided  that  a 
Corporation  may  invest  in  the  stock,  or  other  certificates  of  ownership, 
of  any  other  corporation  organized — 

(a)  Under  the  provisions  of  section  25  (a)  of  the  Federal  Reserve 

Act; 

(b)  Under    the    laws    of    any    foreign    country    or    a    colony    or 

dependency  thereof; 

(c)  Under  the  laws  of  any  State,  dependency,  or  insular  possession 

of  the  United  States; 
provided,  first,  that  such  other  corporation  is  not  engaged  in  the 
general  business  of  buying  or  selling  goods,  wares,  merchandise,  or 
commodities  in  the  United  States;  and  second,  that  it  is  not  transact- 
ing any  business  in  the  United  States  except  such  as  is  incidental  to 
its  international  or  foreign  business. 

Except  with  the  approval  of  the  Federal  Reserve  Board,  no  Corpora- 
tion shall  invest  an  amount  in  excess  of  15  per  cent,  of  its  capital 
and  surplus  in  the  stock  of  any  corporation  engaged  in  t/he  business 
of  banking,  or  an  amount  in  excess  of  10  per  cent,  of  its  capital 
and  surplus  in  the  stock  of  any  other  kind  of  corporation. 

No  Corporation  shall  purchase  any  stock  in  any  other  corporation 
organized  under  the  terms  of  section  25  (a)  or  under  thte  laws  of  any 
State,  which  is  in  substantial  competition  therewith,  or  which  holds 
stock  or  certificates  of  ownership  in  corporations  which  are  in  sub- 


323 

stantial  competition  with  the  purchasing  Corporation.    This  restriction, 
however,  does  not  apply  to  corporations  organized  under  foreign  laws. 

X.    Branches. 

No  Corporation  shall  establish  any  branches  except  with  the  approval 
of  the  Federal  Reserve  Board,  and  in  no  case  shall  any  branch  be 
established  in  the  United  States. 

XI.    Issue  of  Debentures,  Bonds,  and  Promissory  Notes. 

Approval  of  the  Federal  Reserve  Board. — No  Corporation  shall  make 
any  public  or  private  issue  of  its  debentures,  bonds,  notes,  or  other 
such  obligations  without  the  approval  of  the  Federal  Reserve  Board, 
but  this  restriction  shall  not  apply  to  notes  issued  by  the  Corporation 
in  borrowing  from  banks  or  bankers  for  temporary  purposes  not  to 
exceed  one  year.  The  approval  of  the  Federal  Reserve  Board  will  be 
based  solely  upon  the  right  of  the  Corporation  to  make  the  issue  under 
the  terms  of  this  regulation  and  shall  not  be  understood  in  any  way 
to  imply  that  the  Federal  Reserve  Board  has  approved  or  passed  upon 
the  merits  of  such  obligations  as  an  investment.  The  Federal  Reserve 
Board  will  consider  the  general  character  and  scope  of  the  business  of 
the  Corporation  in  determining  the  amount  of  debentures,  bonds,  notes 
or  other  such  obligations  of  the  Corporation  which  may  be  issued  by  it. 

Application. — Every  application  for  the  approval  of  any  such  issue 
by  a  Corporation  shall  be  accompanied  by  (1)  a  statement  of  the 
condition  of  the  Corporation  in  such  form  and  as  of  such  date  as  the 
Federal  Reserve  Board  may  require;  (2)  a  detailed  list  of  the  securi- 
ties by  which  it  Is  proposed  to  secure  such  issue,  stating  their  maturi- 
ties, indorsements,  guaranties,  or  collateral,  if  any,  and  in  general 
terms  the  nature  of  the  transaction  or  transactions  upon  which  they 
were  based;  and  (3)  such  other  data  as  the  Federal  Reserve  Board 
may  from  time  to  time  require. 

Advertisements. — No  circular,  letter,  or  other  document  advertising 
the  issue  of  the  obligations  of  a  Corporation  shall  state  or  contain 
any  reference  to  the  fact  that  the  Federal  Reserve  Board  has  granted 
its  approval  of  the  issue  to  which  the  advertisement  relates.  This 
requirement  will  be  enforced  strictly  in  order  that  there  may  be  no 
possibility  of  the  public's  misconstruing  such  a  reference  to  be  an 
approval  by  the  Federal  Reserve  Board  of  the  merits  or  desirability 
of  the  obligations  as  an  investment. 

XII.    Sale  of  Foreign  Securities. 

Approval  of  the  Federal  Reserve  Board. — No  Corporation  shall  offer 
for   sale    any    foreign    securities    with    its    indorsement   or   guaranty, 


324 

except  with  the  approval  of  the  Federal  Reserve  Board,  but  such 
approval  will  be  based  solely  upon  the  right  of  the  Corporation  to 
make  such  a  sale  under  the  terms  of  this  regulation  and  shall  not  be 
understood  in  any  way  to  imply  that  the  Federal  Reserve  Board  has 
approved  or  passed  upon  the  merits  of  such  securities  as  an  investment. 

Application. — Every  application  for  the  approval  of  such  sale  shall 
be  accompanied  by  a  statement  of  the  character  and  amount  of  the 
securities  proposed  to  be  sold,  their  indorsements,  guaranties,  or  col- 
lateral, if  any,  and  such  other  data  as  the  Federal  Reserve  Board  may 
from  time  to  time  require. 

Advertisements. — No  circular,  letter,  or  other  document  advertising 
the  sale  of  foreign  securities  by  a  Corporation  with  its  indorsement 
or  guaranty  shall  state  or  contain  any  reference  to  the  fact  that  the 
Federal  Reserve  Board  has  granted  its  approval  of  the  sale  of  the 
securities  to  which  the  advertisement  relates. 

XIII.     Acceptances. 

Kinds. — Any  Corporation  may  accept  drafts  and  bills  of  exchange 
drawn  upon  it  which  grow  out  of  transactions  involving  the  importa- 
tion or  exportation  of  goods,  provided,  however,  that  except  with  the 
approval  of  the  Federal  Reserve  Board,  and  subject  to  such  limitations 
as  it  may  prescribe,  no  Corporation  shall  exercise  its  power  to  accept 
drafts  or  bills  of  exchange  if  at  the  time  such  drafts  or  bills  are  pre- 
sented for  acceptance  it  has  outstanding  any  debentures,  bonds,  notes, 
or  other  such  obligations  issued  by  it. 

Maturity. — No  Corporation  shall  accept  any  draft  or  bill  of  exchange 
with  a  maturity  in  excess  of  six  months  except  with  the  approval  of 
the  Federal  Reserve  Board. 

Limitations. —  (1)  Individual  drawers:  No  acceptances  shall  be  made 
for  the  account  of  any  one  drawer  in  an  amount  aggregating  at  any 
time  in  excess  of  10  per  cent,  of  the  subscribed  capital  and  surplus 
of  the  Corporation,  unless  the  transaction  be  fully  secured  or  repre- 
sents an  exportation  or  importation  of  commodities  and  is  guaranteed 
by  a  bank  or  banker  of  undoubted  solvency.  (2)  Aggregates:  When- 
ever the  aggregate  of  acceptances  outstanding  at  any  time  (a)  exceeds 
the  amount  of  the  subscribed  capital  and  surplus,  50  per  cent,  of 
all  the  acceptances  in  excess  of  the  amount  shall  be  fully  secured; 
or  (6)  exceeds  twice  the  amount  of  the  subscribed  capital  and  surplus, 
all  the  acceptances  outstanding  in  excess  of  such  amount  shall  be 
fully  secured.  (The  Corporation  shall  elect  whichever  requirement 
(a)   or  (b)   calls  for  the  smaller  amount  of  secured  acceptances.) 

Reserves. — Against  all  acceptances  outstanding  which  mature  in  30 
days  or  less  a  reserve  of  at  least  15  per  cent,  shall  be  maintained, 
and  against  all  acceptances  outstanding  which  mature  in  more  than 


325 

30  days  a  reserve  of  at  least  3  per  cent,  shall  be  maintained.  Reserves 
against  acceptances  must  be  in  liquid  assets  of  any  or  all  of  the 
following  kinds:  (1)  cash;  (2)  balances  with  other  banks;  (3) 
bankers'  acceptances;  and  (4)  such  securities  as  the  Federal  Reserve 
Bo^rd  may  from  time  to  time  permit. 

XIV.    Deposits. 

In  the  United  States. — No  Corporation  shall  receive  in  the  United 
States  any  deposits  except  such  as  are  incidental  to  or  for  the  purpose 
of  carrying  out  transactions  in  foreign  countries  or  dependencies  of 
the  United  States  where  the  Corporation  has  established  agencies, 
branches,  or  where  it  operates  through  the  ownership  or  control  of 
subsidiary  corporations.  Deposits!  of  this  character  may  be  made  by 
individuals,  firms,  banks,  or  other  corporations,  whether  foreign  or 
domestic,  and  may  be  time  deposits  or  on  demand. 

Outside  the  United  States. — Outside  the  United  States  a  Corporation 
may  receive  deposits  of  any  kind  from  individuals,  firms,  banks,  or 
other  corporations,  provided,  however,  that  if  such  Corporation  has 
any  of  its  bonds,  debentures,  or  other  such  obligations  outstanding 
it  may  receive  abroad  only  such  deposits  as  are  incidental  to  the 
conduct  of  its  exchange,  discount,  or  loan  operations. 

Reserves. — Against  all  deposits  received  in  the  United  States  a  re- 
serve of  not  less  than  13  per  cent,  must  be  maintained.  This  reserve 
may  consist  of  cash  in  vault,  a  balance  with  the  Federal  Reserve 
Bank  of  the  district  in  which  the  head  office  of  the  Corporation  is 
located,  or  a  balance  with  any  member  bank.  Against  all  deposits 
received  abroad  the  Corporation  shall  maintain  such  reserves  as  may 
be  required  by  local  laws  and  by  the  dictates  of  sound  business,  judg- 
ment and  banking  principles. 

XV.     General  Limitations  and  Restrictions. 

Liabilities  of  one  borroioer. — The  total  liabilities  to  a  Corporation 
of  any  person,  company,  firm,  or  corporation  for  money  borrowed,  in- 
cluding in  the  liabilities  of  a  company  or  firm  the  liabilities  of  the 
several  members  thereof,  shall  at  no  time  exceed  10  per  cent,  of  the 
amount  of  its  subscribed  capital  and  surplus,  except  with  the  approval 
of  the  Federal  Reserve  Board:  Provided,  however,  That  the  discount 
of  bills  of  exchange  drawn  in  good  faith  against  actually  existing 
values  and  the  discount  of  commercial  or  business  paper  actually 
owned  by  the  person  negotiating  the  same  shall  not  be  considered 
as  money  borrowed  within  the  meaning  of  this  paragraph.  The 
liability  of  a  customer  on  account  of  an  acceptance  made  by  the 
Corporation  for  his  account  is  not  a  liability  for  money  borrowed 


326 

•within  the  meaning  of  this  paragraph  unless  and  until  he  fails  to 
place  the  Corporation  in  funds  to  cover  the  payment  of  the  acceptance 
at  maturity  or  unless  the  Corporation  itself  holds  the  acceptance. 

Aggregate  liabilities  of  the  Corporation. — The  aggregate  of  the 
Corporation's  liabilities  outstanding  on  account  of  acceptances,  average 
deposits,  domestic  and  foreign,  debentures,  bonds,  notes,  guaranties, 
indorsements,  and  other  such  obligations  shall  not  exceed  at  any  one 
time  ten  times  the  amount  of  the  Corporation's  subscribed  capital 
and  surplus  except  with  the  approval  of  the  Federal  Reserve  Board. 
In  determining  the  amount  of  the  liabilities  within  the  meaning  of 
this  paragraph,  indorsements  of  bills  of  exchange  having  not  more 
than  six  months  to  run,  drawn  and  accepted  by  others  than  the 
Corporation,  shall  not  be  included. 

Operations  abroad. — Except  as  otherwise  provided  in  the  law  and 
these  regulations,  a  Corporation  may  exercise  abroad  not  only  the 
powers  specifically  set  forth  in  the  law  but  also  such  incidental 
powers  as  may  be  usual  in  the  determination  of  the  Federal  Reserve 
Board  in  connection  with  the  transaction  of  the  business  of  banking 
or  other  financial  operations  in  the  countries  in  which  it  shall  tran- 
sact business.  In  the  exercise  of  any  of  these  powers  abroad  a  Cor- 
poration must  be  guided  by  the  laws  of  the  country  in  which  it  is 
operating  and  by  sound  business  judgment  and  banking  principles. 

XVI.    Management. 

The  directors,  officers,  or  employees  of  a  Corporation  shall  exercise 
their  rights  and  perform  their  duties  as  directors,  officers,  or  em- 
ployees, with  due  regard  to  both  the  letter  and  the  spirit  of  the  law 
and  these  regulations.  For  the  purpose  of  these  regulations  the  Cor- 
poration shall,  of  course,  be  responsible  for  all  acts  of  omission  or 
commission  of  any  of  its  directors,  officers,  employees,  or  representa- 
tives in  the  conduct  of  their  official  duties.  The  character  of  the 
management  of  a  Corporation  and  its  general  attitude  toward  the 
purpose  and  spirit  of  the  law  and  these  regulations  will  be  considered 
by  the  Federal  Reserve  Board  in  acting  upon  any  application  made 
under  the  terms  of  these  regulations. 

XVII.    Reports  and  Examinations. 

Reports. — Each  Corporation  shall  make  at  least  two  reports  an- 
nually to  the  Federal,  Reserve  Board  at  such  times  and  in  such  form 
as  it  may  require. 

Examinations. — Each  Corporation  shall  be  examined  at  least  once 
a  year  by  examiners  appointed  by  the  Federal  Reserve  Board.  The 
cost  of  examinations  shall  be  paid  by  the  Corporation  examined. 


327  H 

XVIII.    Amendments  to  Regulations. 

These  regulations  are  subject  to  amendment  by  the  Federal  Reserve 
Board  from  time  to  time,  provided,  however,  that  no  such  amendment 
shall  prejudice  obligations  undertaken  in  good  faith  under  regulations 
in  effect  at  the  time  they  were  assumed. 

§  298.  Maintenance  of  Standard  of  Value — Parity  of  Forms  of 
Money — Gold  Reserve.— All  provisions  of  law  inconsistent  with  or 
superseded  by  any  of  the  provisions  of  this  Act  are  to  that  extent 
and  to  that  extent  only  hereby  repealed :  Provided,  Nothing  in  this 
Act  contained  shall  be  construed  to  repeal  the  parity  provision  or 
provisions  contained  in  an  Act  approved  March  fourteenth,  nine- 
teen hundred  entitled  "An  Act  to  define  and  fix  the  standard  of 
value,  to  maintain  the  parity  of  all  forms  of  money  issued  or  coined 
by  the  United  States,  to  refund  the  public  debt,  and  for  other* 
purposes,"  and  the  Secretary  of  the  Treasury  may  for  the  purpose 
of  maintaining  such  parity  and  to  strengthen  the  gold  reserve, 
borrow  gold  on  the  security  of  United  States  bonds  authorized  by 
section  two  of  the  Act  last  referred  to  or  for  one-year  gold  notes 
bearing  interest  at  a  rate  of  not  to  exceed  three  per  centum  per 
annum,  or  sell  the  same  if  necessary  to  obtain  gold.  When  the 
funds  of  the  Treasury  on  hand  justify,  he  may  purchase  and  re- 
tire such  outstanding  bonds  and  notes.     (Sec.  26,  Act  1913.) 

§  299.  Emergency  Currency.— Sec.  27,  of  Act  Dec.  23,  1913, 
as  amended  by  Act  August  4,  1914,  which  made  several  changes 
in  the  Act  of  May  30,  1908,  known  as  the  "Aldrich-Vreeland  Act" 
and  extended  the  provisions  of  that  Act  to  June  30,  1915,  has 
expired  by  limitation. 

§  300.  Reduction  of  Capital  Stock  of  National  Banks. — See  § 
29,  page  43,  Part  I. 

§  301.  Saving  Clause. — If  any  clause,  sentence,  paragraph,  or 
part  of  this  Act  shall  for  any  reason  be  adjudged  by  any  court  of 
competent  jurisdiction  to  be  invalid,  such  judgment  shall  not 
affect,  impair,  or  invalidate  the  remainder  of  this  Act,  but  shall 
be  confined  in  its  operation  to  the  clause,  sentence,  paragraph,  or 


328 

part  thereof  directly  involved  in  the  controversy  in  which  such 
judgment  shall  have  been  rendered.     (Sec.  29,  Act  Dec.  23,  1913.) 

§  302.  Reservation  of  Right  to  Amend,  Alter,  or  Repeal. — 
The  right  to  amend,  alter,  or  repeal  this  Act  is  hereby  expressly 
reserved.     (Sec.  30,  Act  Dec.  23,  1913.) 

§  303.  Opinions  of  Counsel  of  Board  on  Negotiable  Instru- 
ments, Law,  etc. — The  following  are  short  digests  of  opinions  by 
the  Counsel  of  the  Federal  Reserve  Board  construing  the  Nego- 
tiable Instruments,  Law,  or  affecting  only  National  banks. 

Negotiability  of  Bills  of  Exchange. — Negotiability  of  a  bill  of  ex- 
change is  not  affected  by  provisions  which  waive  demand,  notice,  and 
protest,  which  waive  homestead  exemption  rights;  and  which  provide 
for  the  costs  of  collection  and  attorney's  fees.  (Opinion  of  Counsel 
of  Board,  April  13,  1916.) 

A  bill,  however,  made  payable  with  "collection  charges"  is  non- 
negotiable  while  one  payable  with  "exchange"  is  negotiable.  (Opinion, 
of  Counsel  of  Board,  Oct.  8,  1917.) 

Acceptances — Where  Payable. — An  acceptance  to  pay  at  a  particu- 
lar place  different  from  the  residence  of  the  acceptor  is  a  general  ac- 
ceptance, unless  it  expressly  states  that  the  bill  is  to  be  paid  there 
and  not  elsewhere,  and  does  not  render  the  bill  non-negotiable.  (Opin- 
ions of  Counsel  of  Board,  Feb.  27,  1917,  and  Dec.  20,  1918.) 

"WArvES  of  Demand,  Notice  axd  Protest. — The  acceptor  of  a  bill  of 
exchange  is  the  principal  debtor.  The  law  requires  that  notice  of  de- 
mand and  protest  be  given  to  parties  secondarily  liable  in  case  of 
dishonor.  This  right  to  receive  notice  is  a  personal  one  which  may 
be  waived  by  the  parties  entitled  thereto — that  is,  the  drawer  and  in- 
dorsers;  but  such  waiver  has  no  effect  on  the  acceptor  or  principal 
debtor.     (Opinion  of  Counsel  of  Board,  Feb.  13,  1915.) 

Qualified  Acceptances. — A  bill  of  exchange  drawn  payable  "at 
sight"  and  accepted  payable  in  three  months  is  a  qualified  or  condi- 
tional acceptance,  and  the  maker  and  prior  indorsers  are  released. 
The  instrument  in  effect  becomes  the  promissory  note  of  the  acceptor, 
and  would  not  come  within  the  exception  to  Section  5200  as  a  "bill 
of  exchange"  drawn  in  good  faith  against  actually  existing  value. 
(Opinion  of  Counsel  of  Board,  July  25,  1916.) 


329 

Presentment  of  Bills  for  Acceptance. — The  drawer  and  indorsers 
of  a  bill  of  exchange  made  payable  on  a  date  specified  in,  the  bill  are 
not  discharged  by  a  failure  to  present  for  acceptance,  unless  the  bill 
expressly  provides  that  it  must  be  presented  for  that  purpose,  or 
unless  it  is  payable  elsewhere  than  at  the  residence  or  place  of  busi- 
ness of  the  drawee.     (Opinion  of  Counsel  of  Board,  Oct.  17,  1916.) 

Bills  Payable  With  Attorney's  Fees  or  Collection  Charge. — While 
a  bill  containing  a  provision  for  payment  of  the  costs  of  collection 
and  attorney's  fees,  if  it  is  dishonored  at  maturity,  is  a  valid  negotiable 
instrument,  a  bill  drawn  for  a  fixed  sum  "with  collection  charges"  is 
not  a  negotiable  instrument  unless  it  is  so  drawn  as  to  show  that  no 
collection  charges  are  to  be  included  unless  the  bill  is  dishonored  at 
maturity.     (Opinion  of  Counsel  of  Board,  July  10,  1918.) 

Ncbes  and  Bills  Rediscounted. — A  note  or  bill  rediscounted  in 
good  faith  by  a  member  bank  which  is  no  longer  owned  or  held  by 
the  bank  need  not  be  included  as  a  liability  of  the  maker  to  the 
bank,  within  the  meaning  of  Section  5200,  Revised  Statutes.  Notes 
or  bills  rediscounted  under1  an  agreement  to  repurchase,  or  which  are 
merely  credited  to  the  account  of  the  bank  offering  them  for  redis- 
count, are  subject  to  the  limitations  of  Section  5200.  (Opinion  of 
Counsel  of  Board,  August  7,  1918.) 

Trade  Acceptance  Providing  for  Extension  of  Ttme. — A  note  or 
draft  containing  a  provision  for  an  extension  of  time  should  not  be 
approved  for  general  use  by  the,  Federal  Reserve  Board.  (Opinion  of 
Counsel  of  Board,  July  25,  1918.) 

Trade  Acceptance  Providing  for  Discount  If  Paid  at  Certain  Time 
Before  Maturity. — A  trade  acceptance  providing  for  a  fixed  discount, 
if  paid  at  a  certain  time  before  maturity,  should  not  be  approved  for 
general  use  by  the  Federal  Reserve  Board.  (Opinion  of  Counsel  of 
Board,  August  1,  1918.) 

Sight  Drafts  Accepted  Payable  at  a  Future  Date. — A  sight  draft 
which  is"  accepted  by  the  drawee,  payable  at  a  future  date,  is  a  quali- 
fied acceptance  which  the  holder  may  refuse  to  take,  but  if  such  an 
acceptance  is  taken  by  the  holder,  the  drawer  and  indorsers  are  re- 
leased unless  tkey  have  either  expressly  or  impliedly  authorized  the 
holder  to  take  a  qualified  acceptance  or  unless  they  subsequently  as- 
sent thereto.     (Opinion  of  Counsel  of  Board,  May  7,  191  J.) 

Bills  Payable  to  the  Order  of  the  Drawee. — A  bill  made  payable 
to  the  order  of  the  drawee  is  not  negotiable  until  the  drawee  as  payee 


330 

has  Indorsed  it.  When  it  has  been  accepted  and  indorsed  by  the 
drawee  it  is  a  valid  negotiable  instrument  in  the  hands  of  a  third 
party,  and  the  drawer  is  not  released,  since  the  terms  of  his  order 
have  been  specifically  complied  with.  (Opinion  of  Counsel  of  Board, 
Dec.  13,  1917.) 

Drafts  Payable  With  Interest. — A  provision  in  a  draft  or  bill  of 
exchange  that  it  is  payable  "with  interest  at  the  rate  of  — ■ — '  per 
cent,  per  annum  after  maturity  if  payment  is  delayed"  does  not  affect 
the  negotiability  of  the  instrument.  (Opinion  of  Counsel  of  Board, 
Feb.  19,  1917.) 

Usurious  Charges  by  National  Banks. — Where  a  National  bank,  in 
addition  to'  charging  interest  at  the  highest  legal  rate,  requires  a  bor- 
rower to  give  an  additional  note,  accept  a  certificate  of  deposit  for 
a  like  amount,  and  put  up  such  certificate  as  additional  collateral  to 
his  entire  loan  the  transaction  appears  to  be  usurious.  (Opinion  of 
Counsel  of  Board,  March  12,  1917.) 

National  Bank  Examinations. — The  Comptroller  of  the  Currency 
instructs  National  bank  examiners  to  leave  with  each  National  bank 
upon  the  completion  of  its  examination,  a  bill  covering  its  assessment 
for  the  examination,  with  instructions  that  the  National  banks  de- 
posit with  the  Federal  Reserve  Bank  of  their  district,  in  the  name 
of  the  Comptroller  of  the  Currency,  to  the  credit  of  the  Treasurer  of 
the  United  States,  the  amount  of  the  bill.  (Opinion  of  Counsel  of 
Board,  May,  1917.) 

National  Banks  as  Insurance  Agents. — Regulations  under  which 
National  banks  may  act  as  insurance  agents  and  as  brokers  or  agents 
in  making  or  procuring  loans  on  real  estate  under  the  amendment 
covering  such  action  passed  by  Congress  in  1916,  issued  from  the  office 
of  the  Comptroller  of  the  Currency.  No  such  bank  shall  in  any  case 
guarantee  either  the  principal  or  interest  of  any  such  loans  or  assume 
or  guarantee  the  payment  of  any  premium  on  insurance  policies  issued 
through  its  agency  by  its  principal  or  guarantee  the  truth  of  any 
statement  made  by  an  assured  in  filing  his  application  for  Insurance 
(Opinion  of  Counsel  of  Board,  March,  1917.) 

Loans  on  Improved  Farm  Lands. — Section  24  authorizes  any  Na- 
tional bank  to  loan  on  unencumbered  and  improved  farm  land  up  to 
50  per  cent  of  its  actual  value.  What  proportion  of  the  land  used  as 
security  must  be  improved  or  cultivated  must  necessarily  depend  upon" 
the  facts  of  each  case.     (Opinion  of  Counsel  of  Board,  July  19,  1917.) 


331 

Loans  Secubed  by  Farm  Loan  Bonds. — A  loan  on  the  security  of  a 
farm-loan  bond  should  not  be  classified  as  a  loan  on  real  estate,  and 
National  banks  may  legally  discount  notes  secured  by  such  bonds. 
(Opinion  of   Counsel  of  Board,  June  10,   1918.) 

Section  5200. — If  Bank  A,  which  has  discounted  a  note  for  one  of 
its  customers  later  sells  that  note  without  recourse  to  Bank  B,  such 
note  becomes  subject  to  the  limitations  imposed  by  Section  5200  so 
far  as  Bank  B  is  concerned.  (Opinion  of  Counsel  of  Board,  Dec.  12, 
1917.) 


PART  THREE 

Acts  of  a  General  Nature,  Sections  of  Eevised  Statutes  and 

Eegulations,  Not  Included  in  Parts  I  and  II, 

Affecting  National  Banks. 

CHAPTER  I. 

The  Clayton  Act  and  the  Kern  Amendment.* 

Section  304.  Passage  and  Title  of  Act. 

305.  Interlocking  Directors — Banks  with  Total  Resources 

of  Over  Five  Killion — Private  Bankers. 

306.  Interlocking  Directors — Cities  of  Over  Two  Hundred 

Thousand — Exceptions  to  Act. 

307.  The  Kern  Amendment — Exceptions  to  Act — Substan- 

tial Competition. 

308.  Eligibility  to  Serve  Out  Term. 

309.  Federal  Reserve  Board  to  Enforce  Compliance  with 

Act  When  Applicable  to  Banks. 

310.  Method  of  Enforcing  Compliance — Service  of  Com- 

plaint— Right  to  Be  Heard — Order  to  Cease  Viola- 
tions. 

311.  Application  by  Board  to  Circuit  Court  of  Appeals  to 

Enforce  Order — Procedure  Before  Court. 

312.  Appeal  by  Injured  Party  to  Circuit  Court  of  Appeals. 

313.  Exclusive  Jurisdiction  of  Circuit  Court  of  Appeals. 

314.  Expedition  of  Court  Proceedings. 

315.  Method  of  Serving  Complaints,  Orders,  etc. 

§  304.  Passage  and  Title  of  Act.— An  Act  entitled  "An  Act  to 
supplement  existing  laws  against  unlawful  restraints  and  mon- 

*  The  following  Is  that  part  of  the  Clayton  Anti-trust  Act,  as 
amended,  which  relates  to  banks,  banking  associations  and  trust 
companies. 

333 


334 

opolies,  and  for  other  purposes"  was  approved  by  Congress,  Oc- 
tober 15,  1914. 

§  305.  Interlocking  Directors — Banks  with  Total  Resources  of 
Over  Five  Million — Private  Bankers. — That  from  and  after  two 
years  from  the  date  of  the  approval  of  this  Act  no  person  shall  at 
the  same  time  be  a  director  or  other  officer  or  employee  of  more 
than  one  bank,  banking  association  or  trust  company,  organized  or 
operating  under  the  laws  of  the  United  States,  either  of  which  has 
deposits,  capital,  surplus,  and  undivided  profits  aggregating  more 
than  $5,000,000 ;  and  no  private  banker  or  person  who  is  a  director 
in  any  bank  or  trust  company,  organized  and  operating  under  the 
laws  of  a  State,  having  deposits,  capital,  surplus,  and  undivided 
profits  aggregating  more  than  $5,000,000,  shall  be  eligible  to  be  a 
director  in  any  bank  or  banking  association  organized  or  operating 
under  the  laws  of  the  United  States.  The  eligibility  of  a  director, 
officer,  or  employee  under  the  foregoing  provisions  shall  be  deter- 
mined by  the  average  amount  of  deposits,  capital,  surplus,  and  un- 
divided profits  as  shown  in  the  official  statements  of  such  bank, 
banking  association,  or  trust  company  filed  as  provided  by  law 
during  the  fiscal  year  next  preceding  the  date  set  for  the  annual 
election  of  directors,  and  when  a  director,  officer,  or  employee  has 
been  elected  or  selected  in  accordance  with  the  provisions  of  this 
Act  it  shall  be  lawful  for  him  to  continue  as  such  for  one  year 
thereafter  under  said  election  or  employment.  (Sec.  8,  Act  Oct. 
15,  1914.) 

Status  of  State  Member  Banks. — State  banks  or  trust  companies 
may  have  common  officers  and  directors  with  other  State  banks  and 
trust  companies  whether  or  not  any  of  such  banks  or  trust  companies 
are  members  of  the  Federal  Reserve  System.  (Opinion  of  Attorney 
General,  Sept.  10,  1917.) 

Savings  and  Loan  Associations. — A  savings'  and  loan  association  Is 
a  bank  within  the  meaning  of  that  part  of  Section  8  of  the  Clayton 
Act  which  relates  to  interlocking  bank  directorates.  (Opinion  of 
Counsel  of  Board,  Feb.  3,  1916.)  So  is  a  Morris  plan  bank.  (Informal 
Ruling  of  Board,  June  13,  1917.) 


335 

Non-Member  Banks  in  District  of  Columbia. — A  State  bank  or  trust 
company  which  is  incorporated  under  the  laws  of  a  State,  but  which 
is  doing  business  in  the  District  of  Columbia,  subject  to  limitations 
and  restrictions  imposed  by  the  acts  of  Congress,  is  subject  to  the 
provisions  of  Section  8  of  the  Clayton  Act  which  relate  to  banks  organ- 
ized or  operating  under  the  laws  of  the  United  States.  (Opinion  of 
Counsel  of  Board,  Sept.  12,  1916;  opinion  of  Attorney  General,  Sept. 
10,  1917.) 

Definition  and  Interpretation  of  Term  "Private  Banker." — The 
Board  interprets  the  term  "private  banker"  to  include  partnerships  or 
individuals  who  are  engaged  in  the  banking  business,  as  that  term 
is  generally  understood, — including  those  partnerships  and  individuals 
who  solicit  or  receive  deposits  subject  to  check,  who  do  a  foreign 
exchange,  acceptance,  loan  or  discount  business,  or  who  purchase 
and  sell  and  distribute  issues  of  securities  by  which  capital  is  fur- 
(nished  for  business  or  public  enterprises. 

The  term  "private  banker"  is  interpreted  not  to  include  the  ordinary 
stock,  note,  or  commodity  broker,  unless  a  substantial  proportion  of 
his  profits  are  derived  from,  or  a  substantial  part  of  his  business  con- 
sists in,  one  or  more  of  the  banking  activities  described,  nor  is  it  in- 
terpreted to  include  partnerships  or  individuals  using  only  their  own 
funds  in  making  loans  of  investments. 

No  private  banker  whose  partnership*  or  firm  assets  aggregate  more 
than  five  million  dollars  is  eligible,  under  the  terms  of  the  Clayton 
Act,  to  serve  as  a  director  of  any  member  bank,  and  no  private  banker, 
regardless  of  the  amount  of  partnership  or  firm  assets,  is  eligible  to 
serve  as  a  director,  other  officer  or  employee  of  any  member  bank  lo- 
cated in  a  city  of  more  than  200,000  inhabitants,  if  such  firm  or  partner- 
ship is  located  in  the  same  city. 

The  Kern  amendment  to  the  Clayton  Act  does  not  authorize  the  Fed- 
eral Reserve  Board  to  grant  permission  to  such  private  bankers  to 
serve  as  officers  or  directors  of  a  member  bank  even  though  it  appears 
that  they  are  not  in  substantial  competition  with  such  member  bank. 
(Announcement  of  Board,  Oct.  6,  1916.) 


Large  National  Bank  and  Small  State  Bank. — Clayton  Act  does 
not  prohibit  an  officer  or  director  of  a  National  bank  with  total  assets 
exceeding  $5,000,000  from  serving  at  the  same  time  as  an  officer 
and  director  in  a  State  bank  or  trust  company  with  total  assets  of  less 
than  $5,000,000,  provided  the  banks  in  question  are  not  both  located 
in  the  same  city  of  200,000  or  more  inhabitants.  (Informal  Ruling  of 
Board,  Nov.  1,  1915.) 


336 

Large  State  Bank  and  National  Bank. — Clayton  Act  prohibits  a 
person  who  is  a  director  of  a  State  bank  with  resources  of  more  than 
$5,000,000  from  serving  at  the  same  time  as  a  director  of  a  National 
bank,  regardless  of  size  or  location  of  the  National  bank.  But  see 
Kern  amendment.     (Informal  Ruling  of  Board,  March  4,  1916.) 

Large  Trust  Company  and  Small  National  Bank. — Under  Clayton 
Act  a  person  may  not  serve  as  a  director  of  a  trust  company  with  a 
capital  of  $1,000,000  and  total  resources  of  over  $5,000,000  in  a  city 
of  over  200,000  inhabitants  and  at  the  same  time  as  a  director  and 
officer  of  a  National  bank  having  a  capital  of  $50,000  and  total  re- 
sources of  $2,000,000  in  a  municipality  of  less  than  20,000  inhabitants. 
Under  the  Kern  amendment,  however,  a  person  may,  with  the  consent 
of  the  Federal  Reserve  Board,  serve  both  institutions  provided  the 
trust  company  is  not  in  substantial  competition  with  the  member 
bank.     (Informal  Ruling  of  Board,  June  8,  1916.) 

Two  Small  National  Banks. — There  is  nothing  in  the  Clayton  Act 
which  prohibits  a  person  from  serving  at  the  same  time  as  a  director 
in  two  National  banks  located  in  a  city  of  less  than  200,000  inhabitants 
provided  neither  bank  has  deposits,  capital,  surplus,  and  undivided 
profits  aggregating  more  than  $5,000,000.  (Informal  Ruling  of  Board, 
July  6,  1916.) 

Fiscal  Year. — "Fiscal  Year"  as  used  in  paragraph  1,  Section  8,  of 
the  Clayton  Act  refers  to  the  fiscal  year  of  the  institution  of  which 
the  person  in  question  is  a  director.  (Informal  Ruling  of  Board,  Sept. 
13,  1916.) 

§  306.  Interlocking  Directors — Cities  of  Over  Two  Hundred 
Thousand — Exceptions  to  Act. — No  bank,  banking  association  or 
trust  company,  organized  or  operating  under  the  laws  of  the  United 
States  in  any  city  or  incorporated  town  or  village  of  more  than 
two  hundred  thousand  inhabitants,  as  shown  by  the  last  preceding 
decennial  census  of  the  United  States,  shall  have  as  a  director  or 
other  officer  or  employee  any  private  banker  or  any  director  or  other1 
officer  or  employee  of  any  other  bank,  banking  association  or  trust 
company  located  in  the  same  place:  Provided,  That  nothing  in 
this  section  shall  apply  to  mutual  savings  banks  not  having  a 
capital  stock  represented  by  shares:  Provided  further,  That  a  di- 
rector or  other  officer  or  employee  of  such  bank,  banking  associa- 
tion, or  trust  company  maj  be  a  director  or  other  office  or  em- 


337 

ployee  of  not  more  than  one  other  bank  or  trust  company  organized 
under  the  laws  of  the  United  States  or  any  State  where  the  entire 
capital  stock  of  one  is  owned  by  stockholders  in  the  other:  And 
provided  further,  That  nothing  contained  in  this  section  shall  for- 
bid a  director  of  Class  A  of  a  Federal  reserve  bank,  as  defined  in 
the  Federal  Beserve  Act,  from  being  an  officer  or  director  or  both 
an  officer  and  director  in  one  member  bank.  (See.  8,  Act  Oct. 
15,  1914.) 

Interpretation  of  Clayton  Antitrust  Act. — All  three  paragraphs  of 
Section  8  of  the  Clayton  Antitrust  Act,  relating  to  interlocking  directo- 
rates, become  effective  from  and  after  two  years  from  the  date  of  the 
approval  of  that  act — that  is,  October  15,  1916. 

This  statute,  being  a  Federal  statute,  can  not  relate  to  the  qualifica- 
tions of  directors  of  State  banks  or  trust  companies,  but  merely  pro- 
vides that  persons  who  are  private  bankers,  or  directors,  officers,  or 
employes  of  such  banks  or  trust  companies,  shall,  under  certain  condi- 
tions, be  ineligible  to  serve  as  directors,  officers,  or  employes  of  banks 
organized  or  operating  under  the  laws  of  the  United  States.  (Opinion 
of  Counsel  of  Board,  Nov.  21,  1914.) 

Provisos  to  Clayton  Act  Cumulative. — An  officer,  director,  or  em- 
ploye of  a  member  bank,  who  would  otherwise  come  within  the  pro- 
hibitory language  of  the  Clayton  Act,  may  serve  as  a  director,  officer, 
or  employe  of  one  other  bank  where  the  entire  capital  of  one  is  owned 
by  stockholders  in  the  other,  and  at  the  same  time,  under  the  Kern 
amendment,  may,  with  the  consent  of  the  Federal  Reserve  Board,  serve 
as  an  officer,  director,  or  employe  of  not  more  than  two  other  banks 
which  are  not  in  substantial  competition  with  the  member  bank. 
(Opinion  of  Counsel  of  Board,  July  13,  1916.) 

Memder  of  Bank's  Executive  Committee. — Held  that  under  the  Clay- 
ton Act  a  person  ineligible  as  a  director  may  not  serve  as  a  member 
of  a  bank's  executive  committee.  Prohibition  is  not  only  against  di- 
rectors but  "other  officers  or  employes."  (Informal  Ruling  of  Board, 
Nov.  13,  1916.) 

Mutual  Savings  Bank  Without  Capital  Stock. — Clayton  Act  does 
not  prohibit  a  person,  from  serving  at  the  same  time  as  a  director  of 
a  mutual  savings  bank  not  having  a  capital  stock  represented  by 
shares  and  as  a  director  of  a  member  bank,  regardless  of  whether 
the  two  institutions  are  in  substantial  competition.  (Informal  Ruling 
of  Board,  July  1,  1916.) 
22 


338 

Banks  in  Suburban  Districts. — Any  bank  located  within  the  cor- 
porate limits  of  any  city  of  more  than  200,000  inhabitants  comes 
within  the  prohibitions  of  the  act,  even  though  it  be  located  in  a 
suburban  district.     (Informal  Ruling  of  Board,  April,  1919.) 

Advisory  Committee  of  Member  Banks. — The  members  of  an  ad- 
visory committee  of  a  National  bank  are  not  necessarily  officers,  di- 
rectors or  employes  of  such  bank  within  the  meaning  of  Section  8  of 
the  Clayton  Antitrust  Act.  They  can  not  be  directors  unless  elected 
by  the  shareholders;  and  whether  they  are  officers  or  employes  depends 
entirely  on  the  scope  of  the  rights  and  duties  assigned  to  them  by  the 
board  of  directors.     (Opinion  of  Counsel  of  Board,  Jan.  22,  1916.) 

§  307.  The  Kern  Amendment — Exceptions  to  Act* — Substantial 
Competition.— 'And  provided  further,  That  nothing  in  this  Act 
shall  prohibit  any  officer,  director,  or  employee  of  any  member 
bank  or  class  A  director  of  a  Federal  reserve  bank,  who  shall  first 
procure  the  consent  of  the  Federal  Eeserve  Board,  which  board  is 
hereby  authorized,  at  its  discretion,  to  grant,  withhold,  or  revoke 
such  consent,  from  being  an  officer,  director,  or  employee  of  not 
more  than  two  other  banks,  banking  associations,  or  trust  compa- 
nies, whether  organized  under  the  laws  of  the  United  States  or  any 
State,  if  such  other  bank,  banking  association,  or  trust  company 
is  not  in  substantial  competition  with  such  member  bank. 

The  consent  of  the  Federal  Eeserve  Board  may  be  procured  be- 
fore the  person  applying  therefor  has  been  elected  as  a  class  A 
director  of  a  Federal  reserve  bank  or  as  a  director  of  any  member 
bank.  (Sec.  8,  Act  Oct.  15,  1914,  as  amended  by  Act  May 
15,  1916.) 

The  duty  imposed  upon  the  Federal  Reserve  Board  in  passing  upon 
any  application  made  under  authority  of  this  amendment  is  to  de- 
termine whether  or  not  the  two  banks  in  question  (or  either  of  them) 
are  in  substantial  competition  with  the  member  bank.  If  both  are 
nonmember  banks  the  Act  does  not  require  that  they  shall  not  be  in 
substantial  competition  with  each  other. 

*  For  exception  to  Act  in  case  of  member  banks  and  corporations 
transacting  foreign  business  in  which  member  banks  hold  stock,  see 
Sec.  25,  Federal  Reserve  Act,  §  296. 


339 

It  should  be  borne  in  mind  that  the  Act  does  not  vest  an  arbitrary 
discretion  in  the  Board  to  permit  the  same  person  to  serve  on  the 
board  of  directors  of  any  two  or  more  banks,  when  such  banks  come 
within  the  restrictive  language  of  the  Act  as  originally  passed;  but  it 
merely  confers  authority  upon  the  Board  to  permit  interlocking  di- 
rectorates when  such  banks  are  not  in  substantial  competition,  within 
the   meaning  of   the  Act. 

Substantial  Competition. — It  is  manifest  that  no  fixed  rule  can  be 
prescribed  by  which  this  question  can  be  automatically  determined. 
The  facts  in  each  case  must  be  carefully  considered  and  it  is  the 
duty  of  the  board  to  withhold  its  consent  in  any  case  in  which  it 
would  defeat  the  purposes  of  the  Act  to  permit  the  same  person  to 
serve  as  an  officer,  director,  or  employe  of  more  than  one  bank. 

If  the  two  banks  in  question  are  not  competitors  in  any  respect, 
no  question  arises.  If  they  do  compete,  the  very  difficult  question 
arises  whether  or  not  the  competition  is  "substantial." 

In  general,  two  banks  coming  within  the  prohibition  of  the  original 
Act  would  be  deemed  to  be  in  substantial  competition  within  the  mean- 
ing of  the  language  used  in  the  amendment  if  the  business  engaged 
in  by  such  banks  under  natural  and  normal  conditions  conflicts  or 
interferes,  or  if  the  cessation  of  competition  between  the  two  would 
be  injurious  to  customers,  or  would-be  customers,  or  would  probably 
result  in  appreciably  lessening  the  volume  of  business  or  kinds  of 
business  of  either  institution. 

It  is  realized  that  some  difficulty  will  be  experienced  in  the  appli- 
cation of  this  test. 

It  is   necessary  that  consideration  should   be   given — 

(1)  To  the  size  in  aggregate  resources  of  banks  involved. 

(2)  To  the  character  of  business  engaged  in,  i.  e.,  the  extent  of  com- 
mercial business  and  extent  of  purely  investment  or  trust  company 
business  of  the  two  institutions. 

(3)  "Whether  the  operations  of  the  two  banks  cover  the  same  geo- 
graphical territory. 

(4)  Whether  the  two  banks  actually  compete  to  any  appreciable  ex- 
tent in  any  important  activity,  for  example,  (a)  in  soliciting  deposits 
on  demand  or  on  time  from  other  banks  or  individuals,  (&)  in  the 
purchase  or  sale  of  commercial  paper  or  other  securities,  (c)  in  the 
purchase  or  sale  of  foreign  exchange,  (d)  in  soliciting  trusteeships, 
etc.     (Instructions  of  Board,  July  6,  1916.) 

Forms  for  use  in  obtaining  the  consent  of  the  Federal  Reserve  Board 
will  be  furnished  by  the  Board  upon  request.  These  forms  when 
properly  executed  should  be  filed  with  the  Federal  Reserve  Agent  of 
the  district  in  which  the  applicant  resides. 


340 

Statement  by  Board,  Sept.  19,  1916. — The  Board  has  considered  each 
case  on  its  own  merits,  but  has  taken  the  general  position  that  the 
mere  purchase  by  two  banks  of  commercial  paper  in  the  open  market, 
or  the  making  of  time  or  demand  loans  on  collateral  securities  having 
a  wide  market,  or  the  purchasing  of  such  securities,  need  not  neces- 
sarily or  invariably  be  considered  as  indicating  "substantial  competi- 
tion" within  the  meaning  of  the  Kern  Amendment.  It  is,  however, 
the  view  of  the  Board  that  "substantial  competition"  must  be  held 
to  exist  in  cases  where  the  resources  of  the  banks  are  of  such  magni- 
tude, or  of  such  character  that  the  ability  of  the  banks  jointly  to  grant 
or  to  withhold  credit,  or  otherwise  to  influence  the  conditions  under 
which  credit  may  be  obtained,  might  constitute  them  a  dominant  factor 
in  the  general  loan  market,  even  though  the  character  of  the  deposits 
carried  by  the  institutions  in  question  might  be  quite  different. 

All  applications  granted  are,  in  accordance  with  the  terms  of  the 
Kern  amendment,  subject  to  revocation  by  the  Federal  Reserve  Board. 

Duration  of  Permits. — Where  the  Federal  Reserve  Board  has  once 
granted  permission  to  a  person  to  serve  at  the  same  time  as  a  di- 
rector of  two  or  more  institutions  under  the  provisions  of  the  Kern 
amendment  to  Section  8  of  the  Clayton  Act,  that  permission  is  con- 
tinuing and  good  until  revoked  by  the  Federal  Reserve  Board.  (In- 
formal Ruling  of  Board,  Oct.,  1917.) 

§  308.  Eligibility  to  Serve  Out  Term. — When  any  person  elec- 
ted or  chosen  as  a  director  or  officer  or  selected  as  an  employee  of 
any  bank  or  other  corporation  subject  to  the  provisions  of  this  Act 
is  eligible  at  the  time  of  Ins  election  or  selection  to  act  for  such 
bank  or  other  corporation  in  such  capacity  his  eligibility  to  act  in 
such  capacity  shall  not  be  affected  and  he  shall  not  become  or  be 
deemed  amenable  to  any  of  the  provisions  hereof  by  reason  of  any 
change  in  the  affairs  of  such  bank  or  other  corporation  from  what- 
soever case,  whether  specifically  excepted  by  any  of  the  provisions 
hereof  or  not,  until  the  expiration  of  one  year  from  the  date  of  Ins 
election  or  employment.     (Sec.  8,  Act  Oct.  15,  1914.) 

The  obvious  purpose  of  this  provision  is  to  permit  a  director  or  of- 
ficer to  serve  out  his  term  where,  at  the  time  of  his  election,  the  bank 
has  aggregate  resources  of  less  than  $5,000,000  or  the  city  has  less 
than  200,000  inhabitants,  but  during  the  succeeding  year  the  resources 
are  increased  to  an  amount  In  excess  of  $5,000,000  or  the  population 
becomes  more  than  200,000. 


341 

§  309.  Federal  Eeserve  Board  to  Enforce  Compliance  with  Act 
When  Applicable  to  Banks. — That  authority  to  enforce  compli- 
ance with  sections  two,  three,  seven  and  eight  of  this  Act  by  the 
persons  respectively  subject  thereto  is  hereby  vested :  in  the  Inter- 
state Commerce  Commission  where  applicable  to  common  carriers, 
in  the  Federal  Eeserve  Board  where  applicable  to  banks,  banking 
associations  and  trust  companies,  and  in  the  Federal  Trade  Com- 
mission where  applicable  to  all  other  character  of  commerce,  to  be 
exercised  as  follows.     (Sec.  11,  Act  Oct.  15,  1914.) 

§  310.  Method  of  Enforcing  Compliance — Service  of  Compliant 
— Right  to  Be  Heard — Order  to  Cease  Violations.— 'Whenever  the 
commission  or  board  vested  with  jurisdiction  thereof  shall  have 
reason  to  believe  that  any  person  is  violating  or  has  violated  any 
of  the  provisions  of  sections  two,  three,  seven  and  eight  of  this 
Act,  it  shall  issue  and  serve  upon  such  person  a  complaint  stating 
its  charges  in  that  respect,  and  containing  a  notice  of  a  hearing 
upon  a  day  and  at  a  place  therein  fixed  at  least  thirty  days  after 
the  service  of  said  complaint.  The  person  so  complained  of  shall 
have  the  right  to  appear  at  the  place  and  time  so  fixed  and  show 
cause  why  an  order  should  not  be  entered  by  the  commission  or 
board  requiring  such  person  to  cease  and  desist  from  the  violation 
of  the  law  so  charged  in  said  complaint.  Any  person  may  make 
application,  and  upon  good  cause  shown  may  be  allowed  by  the 
commission  or  board,  to  intervene  and  appear  in  said  proceeding 
by  counsel  or  in  person.  The  testimony  in  any  such  proceeding 
shall  be  reduced  to  writing  and  filed  in  the  office  of  the  commission 
or  board.  If  upon  such  hearing  the  commission  or  board,  as  the 
case  may  be,  shall  be  of  the  opinion  that  any  of  the  provisions  of 
said  sections  have  been  or  are  being  violated,  it  shall  make  a  report 
in  writing  in  which  it  shall  state  its  findings  as  to  the  facts,  and 
shall  issue  and  cause  to  be  served  on  such  person  an  order  requiring 
such  person  to  cease  and  desist  from  such  violations,  and  divest 
itself  of  the  stock  held  or  rid  itself  of  the  directors  chosen  contrary 
to  the  provisions  of  sections  seven  and  eight  of  this  Act,  if  any 
there  be,  in  the  manner  and  within  the  time  fixed  by  said  order. 
Until  a  transcript  of  the  record  in  such  hearing  shall  have  been 


342 

filed  in  a  circuit  court  of  appeals  of  the  United  States,  as  herein- 
after provided,  the  commission  or  board  may  at  any  time,  upon 
such  notice  and  in  such  manner  as  it  shall  deem  proper,  modify 
or  set  aside,  in  whole  or  in  part,  any  report  or  any  order  made  or 
issued  by  it  under  this  section.     (Sec.  11,  Act  Oct.  15,  1914.) 

Enforcement  of  Provisions  of  Act. — Section  8  of  the  Clayton  Act  as 
to  interlocking  bank  directorates  does  not  attach  any  penalty  for  non- 
compliance with  its  provisions.  Section  11,  however,  authorizes  the 
Federal  Reserve  Board  to  serve  a  complaint  upon  any  person  violating 
the  provisions  of  Section  8  with  notice  of  hearing.  Board  may  after 
hearing  serve  an  order  requiring  the  person  complained  of  to  desist 
from  such  violations  and  resign  the  directorships  held  contrary  to 
law.  Failure  to  obey  the  order  may  be  followed  by  application  to  the 
Circuit  Court  of  Appeals  of  the  United  States  for  its  enforcement. 
(Informal  Ruling  of  Board,  Oct.  4,  1916.) 

§  311.  Application  by  Board  to  Circuit  Court  of  Appeals  to  En- 
force Order — Procedure  Before  Court. — If  such  person  fails  or 
neglects  to  obey  such  order  of  the  commission  or  board  while  the 
same  is  in  effect,  the  commission  or  board  may  apply  to  the  circuit 
court  of  appeals  of  the  United  States,  within  any  circuit  where  the 
violation  complained  of  was  or  is  being  committed  or  where  such 
person  resides  or  carries  on  business,  for  the  enforcement  of  its 
order,  and  shall  certify  and  file  with  its  application  a  transcript 
of  the  entire  record  in  the  proceeding,  including  all  the  testimony 
taken  and  the  report  and  order  of  the  commission  or  board.  Upon 
such  filing  of  the  application  and  transcipt  the  court  shall  cause 
notice  thereof  to  be  served  upon  such  person  and  thereupon  shall 
have  jurisdiction  of  the  proceeding  and  of  the  question  determined 
therein,  and  shall  have  power  to  make  and  enter  upon  the  plead- 
ings, testimony,  and  proceedings  set  forth  in  such  transcript  a  de- 
cree affirming,  modifying,  or  setting  aside  the  order  of  the  com- 
mission or  board.  The  findings  of  the  commission  or  board  as  to 
the  facts,  if  supported  by  testimony,  shall  be  conclusive.  If  either 
party  shall  apply  to  the  court  for  leave  to  adduce  additional  evi- 
dence, and  shall  show  to  the  satisfaction  of  the  court  that  such  ad- 
ditional evidence  is  material  and  that  there  were  reasonable  grounds 
for  the  failure  to  adduce  such  evidence  in  the  proceeding  before 


343 

the  commission  or  board,  the  court  may  order  such  additional  evi- 
dence to  be  taken  before  the  commission  or  board  and  to  be  adduced 
upon  the  hearing  in  such  manner  and  upon  such  terms  and  condi- 
tions as  to  the  court  may  seem  proper.  The  commission  or  board 
may  modify  its  findings  as  to  the  facts,  or  make  new  findings,  by 
reason  of  the  additional  evidence  so  taken,  and  it  shall  file  such 
modified  or  new  findings,  which,  if  supported  by  testimony,  shall 
be  conclusive,  and  its  recommendation,  if  any,  for  the  modification 
or  setting  aside  of  its  original  order,  with  the  return  of  such  addi- 
tional evidence.  The  judgment  and  decree  of  the  court  shall  be 
final,  except  that  the  same  shall  be  subject  to  review  by  the  Su- 
preme Court  upon  certiorari  as  provided  in  section  two  hundred 
and  forty  of  the  Judicial  Code.    (Sec.  11,  Act  Oct.  15,  1914.) 

§  312.  Appeal  by  Injured  Party  to  Circuit  Court  of  Appeals. — 

Any  party  required  by  such  order  of  the  commission  or  board  to 
cease  and  desist  from  a  violation  charged  may  obtain  a  review  of 
such  order  in  said  circuit  court  of  appeals  by  filing  in  the  court  a 
written  petition  praying  that  the  order  of  the  commission  or  board 
be  set  aside.  A  copy  of  such  petition  shall  be  forthwith  served  upon 
the  commission  or  board,  and  thereupon  the  commission  or  board 
forthwith  shall  certify  and  file  in  the  court  a  transcript  of  the 
record  as  hereinbefore  provided.  Upon  the  filing  of  the  transcript 
the  court  shall  have  the  same  jurisdiction  to  affirm,  set  aside,  or 
modify  the  order  of  the  commission  or  board  as  in  the  case  of  an 
application  by  the  commission  or  board  for  the  enforcement  of  its 
order,  and  the  findings  of  the  commission  or  board  as  to  the  facts, 
if  supported  by  testimony,  shall  in  like  manner  be  conclusive. 
(Sec.  11,  Act  Oct.  15,  1914.) 

§  313.  Exclusive  Jurisdiction  of  Circuit  Court  of  Appeals. — 

The  jurisdiction  of  the  circuit  court  of  appeals  of  the  United  States 
to  enforce,  set  aside,  or  modify  orders  of  the  commission  or  board 
shall  be  exclusive.    (Sec.  11,  Act  Oct.  15,  1914.) 

§  314.  Expedition  of  Court  Proceedings.—  Such  proceedings  in 
the  circuit  court  of  appeals  shall  be  given  precedence  over  other 


344 

cases  pending  therein,  and  shall  be  in  every  way  expedited.  No 
order  of  the  commission  or  board  or  the  judgment  of  the  court 
to  enforce  the  same  shall  in  any  wise  relieve  or  absolve  any  per- 
son from  any  liability  under  the  antitrust  Acts.  (Sec.  11,  Act 
Oct.  15,  1914.) 

§  315.  Method  of  Serving  Complaints,  Orders,  etc. —  Com- 
plaints, orders,  and  other  processes  of  the  commission  or  board 
under  this  section  may  be  served  by  anyone  duly  authorized  by 
the  commission  or  board,  either  (a)  by  delivering  a  copy  thereof 
to  the  person  to  be  served,  or  to  a  member  of  the  partnership  to 
be  served,  or  to  the  president,  secretary,  or  other  executive  officer 
or  a  director  of  the  corporation  to  be  served;  or  (b)  by  leaving 
a  copy  thereof  at  the  principal  office  or  place  of  business  of  such 
person;  or  (c)  by  registering  and  mailing  a  copy  thereof  addressed 
to  such  person  at  his  principal  office  or  place  of  business.  The 
verified  return  by  the  person  so  serving  said  complaint,  order, 
or  other  process  setting  forth  the  manner  of  said  service  shall  be 
proof  of  the  same,  and  the  return  post-office  receipt  for  said  com- 
plaint, order,  or  other  process  registered  and  mailed  as  aforesaid 
shall  be  proof  of  the  service  of  the  same.  (Sec.  11,  Act  Oct. 
15,  1914.) 


CHAPTER  II. 
Government  Depositories. 

Section  316.  Duty  of  Disbursing  Officers. 

317.  Provisions  for  Deposit  by  Certain  Postmasters. 

318.  Misappropriating  Postal  Funds  or  Property — Pun- 

ishment   for — Prima    Facie    Evidence — Deposits, 
etc.,  Permitted. 

319.  Deposit  of  Proceeds  of  Sale  of  Liberty  Bonds. 

320.  Eeserve  Requirements  not  Applicable  to  Government 

Deposits. 

321.  Government  Deposits  in  Federal  Land  Banks. 

322.  Regular  and  Special  Depositories. 

323.  Penalty  for  Unauthorized  Deposit  of  Public  Money. 

324.  Penalty  for  Unauthorized  Receipt  or  Use  of  Public 

Money. 

§  316.  Duty  of  Disbursing  Officers. — It  shall  be  the  duty  of 
every  disbursing  officer  having  any  public  money  intrusted  to  him 
for  disbursement  to  deposit  the  same  with  the  Treasurer  or  some 
one  of  the  assistant  treasurers  of  the  United  States,  and  to  draw 
for  the  same  only  as  it  may  be  required  for  payments  to  be  made 
by  him  in  pursuance  of  law;  and  draw  for  the  same  only  in  favor 
of  the  persons  to  whom  payment  is  made,  and  all  transfers  from 
the  Treasurer  of  the  United  States  to  a  disbursing  officer  shall  be 
by  draft  or  warrant  on  the  Treasury  or  an  assistant  treasurer  of 
the  United  States.  In  places,  however,  where  there  is  no  Treas- 
urer or  assistant  treasurer,  the  Secretary  of  the  Treasury  may, 
when  he  deems  it  essential  to  the  public  interest,  specially  author- 
ize in  writing  the  deposit  of  such  public  money  in  any  other  public 
depository,  or,  in  writing,  authorize  the  same  to  be  kept  in  any 
other  manner,  and  under  such  rules  and  regulations  as  he  may 
deem  most  safe  and  effectual  to  facilitate  the  payments  to  public 

345 


346 

creditors.  (Rev.  Stat.  U.  S.  Sec.  3620,  as  amended  by  Act  Feb. 
27,  1877,  Sec.  1;  19  Stat.  U.  S.,  249.) 

[The  Act  of  March  2,  1907,  34  Stat.  U.  S.,  1166  authorizes  army  of- 
ficers to  keep  in  their  possession  restricted  amounts  of  public  funds.] 

It  will  be  noted  that  such  deposits  can  not  be  made  with  banks  in 
places  where  there  is  a  Subtreasury.  Second,  That  the  designation 
of  a  member  bank  as  a  Government  Depositary  under  Sec.  5153,  R. 
S.,  as  amended  by  Sec.  15  of  the  Federal  Reserve  Act,  does  not  author- 
ize it  to  receive  such  deposits,  but  in  order  to  become  a  Depositary 
for  such  funds,  a  Regular  Depositary  must  be  further  designated 
specially  for  the  purpose.  Third,  The  provision  that  the  Secretary 
may  "in  writing  authorize  Disbursing  Officers'  Funds  to  be  kept  in 
any  other  manner,  as  he  may  deem  most  safe  and  effectual  to  facilitate 
the  payments  to  public  creditors;"  up  to  the  present  time  has  only 
been  used  for  Disbursing  Officers  in  out  of  the  way  places,  permitting 
them  to  hold  their  own  funds  at  their  own  risk,  but  generally  when 
so  situated  disbursing  officers  keep  their  funds  in  some  Depositary  in 
New  York,  and  local  banks  are  glad  to  secure  eastern  exchange  by 
cashing  their  New  York  drafts. 

§  317.  Provisions  for  Deposit  by  Certain  Postmasters. —  Any 

postmaster,  having  public  money  belonging  to  the  Government, 
at  an  office  within  a  city  or  town  where  there  is  no  Treasurer  or 
assistant  treasurer  of  the  United  States,  or  designated  depositary, 
may  deposit  the  same  temporarily,  at  his  own  risk  and  in  his  offi- 
cial capacity,  in  any  National  or  State  bank  in  the  State  in  which 
the  said  postmaster  resides,  or  in  which  his  office  is  located,  or 
within  a  reasonable  radius  of  his  post-office  in  an  adjacent  State, 
but  no  authority  or  permission  is  or  shall  be  given  for  the  pay- 
ment to  or  receipt  by  a  postmaster  or  any  other  person,  of  interest, 
directly  or  indirectly,  on  any  deposit  made  as  herein  described. 
(Rev.  Stat.  IT.  S.  Sec.  3847,  as  amended  by  Act  May  27,  1908;  35 
Stat.  U.  S.,  415.) 

Every  Postmaster  who  makes  any  such  deposits  shall  report  quarterly 
to  the  Postmaster  General  the  name  of  the  bank  where  such  deposits 
have  been  made,  and  also  state  the  amount  which  may  stand  at  the 
time  to  his  credit. 

It  will  be  seen  from  this  provision  of  the  law  that  arrangements  for 


347 

deposits  referred  to  in  this  section  are  to  be  made,  not  with  the  Post- 
master-General, but  with  the  local  Postmaster. 

§  318.  Misappropriating  Postal   Funds  or  Property — Punish- 
ment for — Prima  Facie   Evidence — Deposits,   etc.,   Permitted. — 

Whoever,  being  a  postmaster  or  other  person  employed  in  or  con- 
nected with  any  branch  of  the  postal  service,  shall  loan,  use,  pledge, 
hypothecate,  or  convert  to  his  own  use,  or  shall  deposit  in  any  bank 
or  exchange  for  other  funds  or  property,  except  as  authorized  by 
law,  any  money  or  property  coming,  into  his  hands  or  under  his 
control  in  any  manner  whatever,  in  the  execution  or  under  color 
of  his  office,  employment,  or  service,  whether  the  same  shall  be 
the  money  or  property  of  the  United  States  or  not;  or  shall  fail 
or  refuse  to  remit  to  or  deposit  in  the  Treasury  of  the  United  States 
or  in  a  designated  depository,  or  to  account  for  or  turn  over  to 
the  proper  officer  or  agent,  any  such  money  or  property,  when  re- 
quired so  to  do  by  law  or  the  regulations  of  the  Post  Office  Depart- 
ment, or  upon  demand  or  order  of  the  Postmaster  General,  either 
directly  or  through  a  duly  authorized  officer  or  agent,  shall  be 
deemed  guilty  of  embezzlement ;  and  every  such  person,  as  well  as 
every  other  person  advising  or  knowingly  participating  therein, 
shall  be  fined  in  a  sum  equal  to  the  amount  or  value  of  the  money 
or  property  embezzled,  or  imprisoned  not  more  than  ten  years,  or 
both.  Any  failure  to  produce  or  to  pay  over  any  such  money  or 
property,  when  required  so  to  do  as  above  provided,  shall  be  taken 
to  be  prima  facie  evidence  of  such  embezzlement;  and  upon  the 
trial  of  any  indictment  against  any  person  for  such  embezzlement, 
it  shall  be  prima  facie  evidence  of  a  balance  against  him  to  pro- 
duce a  transcript  from  the  account  books  of  the  Auditor  for  the 
Post  Office  Department.  But  nothing  herein  shall  be  construed  to 
prohibit  any  postmaster  depositing,  under  the  direction  of  the. 
Postmaster  General,  in  a  National  bank  designated  by  the  Secre- 
tary of  the  Treasury  for  that  purpose,  to  his  own  credit  as  post- 
master, any  funds  in  his  charge,  nor  prevent  his  negotiating  drafts 
or  other  evidences  of  debt  through  such  bank,  or  through  United 
States  disbursing  officers,  or  otherwise,  when  instructed  or  required 
so  to  do  by  the  Postmaster  General,  for  the  purpose  of  remitting 


348 

surplus  funds  from  one  post  office  to  another.    (Act  March  4,  1909, 
Sec.  225;  35  Stat.  U.  S.,  1133.) 

The  Postoffice  Department  has  found  very  little  occasion  for  availing 
itself  of  this  last-mentioned  provision,  except  that  in  various  sections 
of  the  country  designated  Depositaries  have  been  authorized  to  receive 
surplus  money-order  funds  for  the  convenience  of  local  Postmasters,  as 
otherwise  it  is  necessary  for  the  Postmasters  to  purchase  exchange  to 
transfer  such  funds.  These  deposits  are  reported  to  the  Treasury  De- 
partment like  other  deposits,  and  the  latter  credits  the  Postoffice  De- 
partment. 

§  319.  Deposit  of  Proceeds  of  Sale  of  Liberty  Bonds. — 
That  the  Secretary  of  the  Treasury,  in  his  discretion,  is  hereby 
authorized  to  deposit  in  such  banks  and  trust  companies  as  he  may 
designate  the  proceeds,  or  any  part  thereof,  arising  from  the  sale 
of  the  bonds  and  certificates  of  indebtedness  authorized  by  this 
Act,  or  the  bonds  previously  authorized  as  described  in  section 
four  of  this  Act,  and  such  deposits  may  bear  such  rate  of  interest 
and  be  subject  to  such  terms  and  conditions  as  the  Secretary  of 
the  Treasury  may  prescribe:  Provided,  That  the  amount  so  de- 
posited shall  not  in  any  case  exceed  the  amount  withdrawn  from 
any  such  bank  or  trust  company  and  invested  in  such  bonds  or 
certificates  of  indebtedness  plus  the  amount  so  invested  by  such 
bank  or  trust  company,  and  such  deposits  shall  be  secured  in  the 
manner  required  for  other  deposits  by  section  fifty-one  hundred 
and  fifty-three,  Eevised  Statutes,  and  amendments  thereto.  (Sec. 
7,  Act  April  24,  1917.) 

§  320.  Reserve  Requirements  Not  Applicable  to  Government 
Deposits. —  That  the  provisions  of  section  fifty-one  hundred  and 
ninety-one  of  the  Eevised  Statutes,  as  amended  by  the  Federal 
Eeserve  Act  and  the  amendments  thereof,  with  reference  to  the 
reserves  required  to  be  kept  by  National  banking  associations  and 
other  member  banks  of  the  Federal  Eeserve  System,  shall  not  apply 
to  deposits  of  public  moneys  by  the  United  States  in  designated 
depositaries.     (Sec.  7,  Act  April  24,  1917.) 

See   §  280   under  Federal  Reserve  Act. 


349 

§  321.  Government  Deposits  in  Federal  Land  Banks. — That  all 
Federal  land  banks  and  joint  stock  land  banks  organized  under 
this  Act,  when  designated  for  that  purpose  by  the  Secretary  of 
the  Treasury  shall  be  depositaries  of  public  money,  except  receipts 
from  customs,  under  such  regulations  as  may  be  prescribed  by  said 
Secretary;  and  they  may  also  be  employed  as  financial  agents  of 
the  Government ;  and  they  shall  perform  all  such  reasonable  duties, 
as  depositaries  of  public  money  and  financial  agents  of  the  Gov- 
ernment, as  may  be  required  of  them.  And  the  Secretary  of  the 
Treasury  shall  require  of  the  Federal  land  banks  and  joint  stock 
land  banks  thus  designated  satisfactory  security,  by  the  deposit 
of  United  States  bonds  or  otherwise,  for  the  safekeeping  and 
prompt  payment  of  the  public  money  deposited  with  them,  and 
for  the  faithful  performance  of  their  duties  as  financial  agents 
of  the  Government.  No  Government  funds  deposited  under  the 
provisions  of  this  section  shall  be  invested  in  mortgage  loans  or 
farm  loan  bonds.     (Sec.  6,  Act  July  17,  1916;  39  Stat.  L.,  365.) 

§  322.  Regular  and  Special  Depositaries. — See  §  30  under  Na- 
tional Bank  Act  and  §  255  under  Federal  Reserve  Act. 

Practically  all  of  the  following  annotations  are  taken  from  Treasury- 
Circular  No.  176,  dated  December  31,  1919,  and  constitute  the  regu- 
lations governing  Public  Money  deposits  in  regular  depositary  banks. 

All  previous  regulations  and  instructions  inconsistent  herewith  are 
superseded. 

Except  as  otherwise  specifically  provided,  nothing  contained  In  this 
circular  affects  deposits  by  postmasters  to  the  credit  of  their  official 
disbursing  accounts,  the  deposit  of  court  funds  by  United  States  courts 
and  their  officers,  or  the  deposit  of  Postal  Savings  funds,  in  cases 
where  such  deposits  are  not  for  credit  by  the  depositary  in  the  account 
of  the  Treasurer  of  the  United  States.  Unless  specifically  extended 
thereto  by  the  Secretary  of  the  Treasury,  nothing  contained  in  this 
circular  applies  to  or  governs  the  deposit  of  public  moneys  in  Federal 
land  banks  or  joint  stock  landi  banks  under  the  act  approved  July  17, 
1916,  as  amended,  or  the  deposit  of  public  moneys  or  the  payment  of 
Government  warrants  and  checks  outside  of  the  continental  United 
States,  except  to'  the  extent  specifically  extended  by  the  Secretary  of 
the  Treasury  from  time  to  time.  The  Secretary  of  the  Treasury  may 
withdraw  or  amend  at  any  time  or  from  time  to  time  any  or  all  of 
the  provisions  of  this  circular. 


350 

Deposit  of  Public  Moneys. — All  public  moneys  shall  bo  deposited 
with  the  Treasurer  of  the  United  States,  Federal  Reserve  Banks  and 
branches,  Assistant  Treasurers  of  the  United  States,  and  regular 
National  bank  depositaries,  and,  with  special  depositaries  under  the 
act  approved  September  24,  1917,  as  amended  and  supplemented.  All 
deposits  of  public  moneys  hereunder  (except  with  such  special  de- 
positaries) shall  be  for  credit  to  the  account  of  the  Treasurer  of 
the  United  States. 

Classes  of  Depositaries. — The  established  policy  of  the  Treasury 
Department  is  to  designate  and  maintain  balances  with  regular  Na- 
tional bank  depositaries  of  public  moneys  only  at  points  where  a 
depositary  is  necessary  to  meet  the  requirements  of  Government  of- 
ficers for  cash  for  pay-roll  or  other  expenditures,  and  then  only  if 
there  is  no  Federal  Reserve  Bank  or  branch  located  at  or  near  the 
point.  National  banks  when  designated  by  the  Secretary  of  the 
Treasury,  however,  may  be  depositaries  of  public  moneys  with  a 
maximum  qualification,  for  the  sole  purpose  of  receiving  deposits 
made  by  United  States  courts  and  their  officers,  by  postmasters,  or 
by  other  duly  authorized  Government  officers,  for  credit  to  their 
official  disbursing  accounts  elsewhere  than  with  the  Treasurer  of  the 
United  States,  provided  that  such  depositaries  qualify,  before  receiv- 
ing deposits,  by  pledging  as  collateral  security  for  such  deposits,  in- 
cluding interest  thereon,  securities  of  the  classes  hereinafter  described 
to  an  amount,  taken  at  the  rates  provided,  at  least  equal  to  such 
deposits.  National  bank  depositaries  designated  with  a  maximum 
qualification  for  this  purpose  alone  are  not  thereby  authorized  to 
accept  any  other  deposits  hereunder.  Deposits  arising  from  the  pro- 
ceeds of  sale's  of  bonds,  notes,  and  Treasury  certificates  of  indebtedness 
of  the  United  States,  and  the  payment  of  income  and  profits  taxes, 
may  be  made  from  time  to  time  with  special  depositaries  of  public 
moneys  under  the  act  of  Congress  approved  September  24,  1917,  as 
amended  and  supplemented.  Other  deposits  of  public  moneys  are 
maintained  with  the  several  Federal  Reserve  Banks,  pursuant  to  the 
provisions  of  Section  15  of  the  Federal  Reserve  Act,  as  amended.  All 
inactive  National  bank  depositaries  are  being  discontinued,  pursuant 
to  action  already  taken  by  the  Secretary  of  the  Treasury. 

Regular  Depositaries — Cash  Deposits. — All  cash  received  by  col- 
lectors of  internal  revenue,  collectors  of  customs,  depository  post- 
masters, and  other  depositors  of  public  moneys  shall  be  deposited,  if 
the  depositor  is  located  in  the  same  city  with  a  Federal  Reserve  Bank 
or  branch  bank,  with  such  Federal  Reserve  Bank  or  branch  bank, 
and  in  other  cases  with  the  regular  National  bank  depositary  or  de- 


351 

positaries  with  which  the  depositor  has  been  making  such  deposits, 
unless  and  until  otherwise  instructed  by  the  Secretary  of  the  Treasury: 
Provided,  however,  That  depositors  located  in  the  District  of  Columbia 
shall  make  such  deposits  direct  with  the  Treasurer  of  the  United  States. 
Payments  made  by  postal  or  express  money  order  shall  be  handled, 
subject  to  collection,  in  the  same  mianner  as  cash. 

Regular  Depositaries — Checks  and  Drafts. — All  checks  received 
by  any  Government  officer  are  received  subject  to  collection,  and  in 
the  event  that  any  check  can  not  be  collected  or  is  lost  or  destroyed 
before  collection,  appropriate  action  must  be  taken  by  the  depositor 
in  the  same  manner  as  if  no  check  had  been  received.  Payments 
made  by  check  are  not  effective  unless  and  until  the  check  has  actually 
been  duly  collected  and  paid.  All  checks  shall  be  handled  through 
the  Federal  Reserve  Banks.  Bank  drafts  shall  be  handled  in  the 
same  manner  as  checks. 

Regular  Depositaries — Certificates  of  Deposit. — Certificates  of  de- 
posit shall  be  issued,  until  further  notice,  on  the  following  forms: 
Internal  Revenue,  Form  15  (National  Banks) ;  Customs,  Form)  1% 
(National  Banks) ;  Public  Lands,  Surveys  and  Patent  Fees,  Form  1A 
(National  Banks);  Army,  Navy,  Judiciary,  and  Indian,  Form  1  (Na- 
tional Banks);  Surplus  Money  Order  Funds,  Forms  6594  and  6594A; 
Surplus  Postal  Funds,  Form  6598;  Deposits  for  official  checking  ac- 
count with  Treasurer  of  United  States,  Form  6599;  and  Sales  of 
War-Savings  securities,  Form  1312.  The  original  of  each  certificate 
of  deposit  (unless  otherwise  specifically  instructed,  as  in  cases  where 
the  funds  represented  thereby  are  not  to  be  covered  into  the  Treasury 
by  warrant)  shall  be  transmitted  to  the  Secretary  of  the  Treasury 
(Division  of  Public  Moneys),  through  the  office  of  the  Treasurer  of 
the  United  States,  with  the  transcript  on  Form  17  (National  Banks), 
on  which  the  credit  appears.  The  other  certificates  of  deposit  in  the 
set  should  be  disposed  of  in  accordance  with  the  instructions  which 
appear  on  the  certificate,  and  one  copy  may  be  retained  by  the  de- 
positary for  its  own  records.  Federal  Reserve  Banks  and  branches 
shall  see  that  the  face  of  each  certificate  in  any  set  of  certificates  of 
deposit  covering  in  whole  or  In  part  items  other  than  cash  for  which 
immediate  credit  is  given,  bears  a  legend  reading  as  follows:  "This 
certificate  of  deposit  issued  subject  to  deduction  for  uncollectible 
items."  It  is  of  the  utmost  importance  that  certificates  of  deposit 
be  properly  issued,  and  in  this  connection,  depositaries  should  give 
special  attention  to  two  points,  viz.:  (1)  The  name  and  title  (if  any) 
of  the  depositor,  as  John  Doe,  receiver  of  public  moneys,  »t,  in  cases 
where  the  deposit  is  made  by  one  person  for  account  of  another  per- 


352 

son,  John  Doe,  receiver  of  public  moneys,  through  Richard  Roe;  and 
(2)  the  account  or  purpose  for  which  the  deposit  is  received,  as  Sales 
of  public  lands,  or  Sales  of  War-Savings  securities,  with  a  notation 
of  the  series,  which  should  be  clearly  indicated  in  order  to  enable 
the  Treasury  Department  to  classify  the  deposit  and  credit  the  proper 
receipt  account  at  the  same  time  that  the  depositary  is  charged  with 
the  amount  of  the  deposit.  Depositaries  receiving  deposits  of  Internal 
Revenue  receipts  are  particularly  requested  to  use  great  care  in 
specifying  upon  the  face  of  certificates  of  deposit  on  Form  15  (Na- 
tional Banks)  deposits  of  "Income  and  Profits  Taxes"  separate  and 
distinct  in  each  case  from  deposits  of  Miscellaneous  Internal  Revenue 
Collections  (formerly  called  "Ordinary").  It  is  not  necessary,  how- 
ever, to  make  any  further  separation  of  classes  of  Internal  Revenue 
deposits  on  the  face  of  certificates  of  deposit  on  Form  15  (National 
Banks). 

National  bank  depositaries  are  not  authorized  to  maintain  any 
collection  account  for  deposits  of  public  moneys,  but  are  required  to 
give  immediate  credit  in  the  Treasurer's  account  and  to  issue  certifi- 
cate of  deposit  for  the  full  amount  of  all  public  moneys  deposited  with 
them  for  credit  in  the  Treasurer's  account  in  accordance  with  this 
circular.  Except  pursuant  to  specific  instructions  to  that  effect  from 
the  Secretary  of  the  Treasury,  no  deposits  of  checks  will  be  made  here- 
under with  National  bank  depositaries  for  credit  to  the  account  of  the 
Treasurer  of  the  United  States. 

Regulab  Depositaeies — Excess  Balances. — National  bank  deposi- 
taries, whenever  they  hold  funds  to  the  credit  of  the  Treasurer  of  the 
United  States  in  excess  of  the  authorized  balance,  shall  make  imme- 
diate transfer  of  such  excess  funds  to  the  Treasurer  or  an  Assistant 
Treasurer  of  the  United  States,  or  to  the  Federal  Reserve  Bank  of  the 
district,  or,  in  special  cases,  to  branches  of  Federal  Reserve  Banks.  Na- 
tional bank  depositaries,  whenever  they  hold  funds  to  the  credit  of  other 
Government  officers,  in  excess  of  the  collateral  value  of  the  security 
deposited  therefor,  shall  promptly  report  the  facts  to  the  Secretary 
of  the  Treasury,  Division  of  Public  Moneys,  and  deposit  additional 
security  to  cover  such  deposits. 

Regulab  Depositaeies — Collatebal  Secubitt  fob  Deposits. — From 
the  date  of  this  circular  (Dec.  31,  1919)  and  until  further  notice, 
securities  of  the  following  classes,  and  no  others,  will  be  accepted  as 
security  for  deposits  of  public  moneys  with  regular  National  bank 
depositaries,  and  at  the  rates  below  provided: 

(a)  Bonds,  notes,  and  Treasury  certificates  of  indebtedness  of  the 
United  States,  of  any  issue,  including  outstanding  interim  certificates 
or  receipts  for  payments  therefor;   all  at  par. 


353 

(b)  Bonds  of  the  Federal  Land  Banks,  bonds  of  the  War  Finance 
Corporation,  bonds  of  Porto  Rico  and  the  District  of  Columbia,  and 
bonds  and  certificates  of  indebtedness  of  the  Philippine  Islands;  all 
at  par. 

(c)  The  3y2  per  cent,  bonds  of  the  Territory  of  Hawaii  at  90  per 
cent,  of  market  value;  and  other  bonds  of  said  Territory  at  market 
value,  not  to  exceed  par. 

All  securities  to  be  deposited  as  collateral  security  for  such  de- 
posits must  be  deposited  with  the  Treasurer  of  the  United  States.  On 
or  before  June  30,  1920,  National  bank  depositaries  will  be  required 
to  substitute  securities  of  the  classes  above  described  for  all  securities 
not  falling  within  said  classes  deposited  with  the  Treasurer  of  the 
United  States  as  security  for  such  deposits. 

Regular  Depositabies — Payment  of  Government  Warrants  and 
Checks. — Each  regular  National  bank  depositary  with  an  authorized 
balance  to  the  credit  of  the  Treasurer  of  the  United  States,  will  cash 
Government  warrants  and  checks  drawn  on  the  Treasurer  of  the 
United  States  when  they  are  presented  and  properly  indorsed  by 
responsible  holders  who  guarantee  all  prior  indorsements  thereon,  in- 
cluding the  indorsement  of  the  drawer  when  the  check  is  drawn  in 
his  favor.  Regular  National  bank  depositaries  are  not  required  to 
charge  Government  warrants  and  checks  cashed  by  them  in  the  ac- 
count of  the  Treasurer  of  the  United  States,  except  in  cases  where 
checks  drawn  on  the  Treasurer  of  the  United  States  are  deposited 
for  the  official  credit  of  the  drawer  or  the  credit  of  other  Govern- 
ment officers  in  the  account  of  the  Treasurer  of  the  United  States  and 
in  cases  where  cash  is  furnished  to  a  Government  officer  upon  the 
warrant  or  check  for  pay-roll  or  other  expenditures. 

Regular  Depositaries — Interest  on  Deposits. — Each  National  bank 
depositary  will  be  required  to  pay  interest  at  the  rate  of  2  per  cent, 
per  annum  on  daily  balances.  Interest  will  be  calculated  on  an  actual 
days'  basis,  and  shall  be  paid  semiannually  on  January  1  and  July  1 
in  each  year,  1  per  cent,  for  each  six-months'  period. 

Special  Depositaries. — The  following  annotations  are  taken  from 
Treasury  Circular  No.  92  and  amendments  and  supplements  thereto. 

Any  incorporated  bank  or  trust  company  in  the  United  States  desir- 
ing to  participate  in  deposits  of  public  moneys  arising  from  the  sale 
of  bonds,  notes,  or  profits  taxes  under  Section  8  of  the  Act  Sept.  24, 
1917,  as  amended  and  supplemented,  may  make  application  to  the 
Federal  Reserve  Bank  of  its  district,  on  Form  H  2,  hereto  attached, 
and  accompany  such  application  by  a  certified  copy  of  resolutions  duly 
23 


354 

adopted  by  its  board  of  directors,  in  Form  J  2,  hereto  attached.  In 
fixing  the  maximum  amount  of  deposits  for  which  it  will  apply,  the 
applicant  bank  or  trust  company  should  be  guided  by  the  amount  of 
the  payments  which  it  expects  to  have  to  make,  for  itself  and  its 
customers,  on  account  of  allotments  of  such  bonds  and  certificates, 
and,  as  well,  by  any  statutory  limitations  upon  the  amount  of  deposits 
which  the  applicant  bank  or  trust  company  may  receive  from  any 
one  depositor.  Any  application  may  be  rejected  or  the  applicant  may 
be  designated  for  a  smaller  maximum  amount  than  that  applied  for. 
After  receiving  the  recommendation  of  the  Federal  Reserve  Bank,  the 
Secretary  of  the  Treasury  will  designate1  approved  depositaries. 

Special  Depositaries — Collateral  Security. — Designated  depositar- 
ies will  be  required,  before  receiving  deposits,  to  qualify  by  pledging, 
as  collateral  security  for  such  deposits,  securities  of  the  following 
classes,  to  an  amount,  taken  at  the  rates  below  provided,  at  least  equal 
to  such  deposits: 

(a)  Bonds  and  certificates  of  indebtedness  of  the  United  States 
Government,  of  any  issue,  including  bonds  of  the  Liberty 
Loans  and  interim  certificates  or  receipts  for  payments  there- 
for; all  at  par. 
(6)  Bonds  issued  under  the  United  States  farm  loan  act  and  bonds 
of  the  Philippine  Islands,  Porto  Rico  and  the  District  of 
Columbia;  all  at  par. 

(c)  The  3%  per  cent,  bonds  of  the  Territory  of  Hawaii  at  90  per 

cent,  of  market  value;  and  other  bonds  of  said  Territory  at 
market   value. 

(d)  Bonds  of  any  State  of  the  United  States,  at  market  value;   and 

approved  notes,  certificates  of  indebtedness  and  warrants  is- 
sued by  any  State  of  the  United  States,  at  90  per  cent,  of 
market  value. 

(e)  Approved  bonds  of  any  county,  city  or  political  subdivision  in 

the  United  States;  and  approved  notes,  certificates  of  indebted- 
ness and  warrants  issued  by  any  county  or  city  in  the  United 
States  which  are  direct  obligations  of  the  county  or  city  as 
a  whole;  all  at  90  per  cent,  of  market  value;  but  not  includ- 
ing any  such  bonds  which,  at  the  date  of  this  circular,  are  at 
a  market  price  to  yield  more  than  5%  per  cent,  per  annum, 
nor  any  such  other  obligations  which  at  the  date  of  this 
circular  are  at  a  market  price  to  yield  more  than  6  per  cent, 
per  annum,  if  held  to. maturity,  according  to  standard  tables 
of  bond  values. 
(/)  Approved  dollar  bonds  and  obligations  of  foreign  Governments 
(and   of  the   dependencies   thereof)    engaged   in  war  against 


355 

Germany,  issued  since  July  30,  1914,  at  90  per  cent,  of  the 
market  value  thereof  in  the  United  States,  and  approved 
dollar  bonds  and  obligations  of  any  province  or  city  within 
the  territory  of  any  such  foreign  Government  or  dependency, 
issued  since  July  30,  1914,  at  75  per  cent,  of  the  market 
value  thereof  in  the  United  States. 
(g)  Approved  bonds,  listed  on  some  recognized  stock  exchange  and 
notes,  of  domestic  railroad  companies  within  the  United 
States;  approved  equipment  trust  obligations  of  such  do- 
mestic railroad  companies;  and  approved  bonds  and  notes 
of  domestic  electric  railway  and  traction  companies,  telephone 
and  telegraph  companies,  electric  light,  power,  and  gas  com- 
panies, and  Industrial  companies,  secured  (directly  or  by  the 
pledge  of  mortgage  bonds)  by  mortgage  upon  physical  pro- 
perties in  the  United  States  and  listed  on  some  recognized 
stock  exchange:  all  at  75  per  cent,  of  market  value;  but  not 
including  any  such  bonds  or  obligations  which,  at  the  date 
of  this  circular,  are  at  a  market  price  to  yield  more  than  6*4 
per  cent,  per  annum,  nor  any  such  notes  which  at  the  date 
of  thia  circular  are  at  a  market  price  to  yield  more  than  7% 
per  cent,  per  annum,  if  held  to  maturity,  according  to  stand- 
ard tables  of  bond  values. 
(Ji)  Commercial  paper  and  bankers'  acceptances,  having  maturity 
at  the  time  of  pledge  of  not  to  exceed  six  months,  exclusive 
of  days  of  grace,  and  which  are  otherwise  eligible  for  re- 
discount or  purchase  by  Federal  Reserve  Banks;  and  which 
have  been  approved  by  the  Federal  Reserve  Bank  of  the  dis- 
trict in  which  the  depositary  is  located;  at  90  per  cent,  of 
face  value.  All  such  commercial  paper  and  acceptances  must 
bear  the  indorsement  of  the  depositary  bank  or  trust  company. 
No  security  shall  be  valued  at  more  than  par.  No  State  or  municipal 
bond,  obligation,  or  evidence  of  indebtedness  shall  be  accepted  if  the 
State  or  municipality  has  made  default  in  payment  of  principal  or 
interest  during  the  past  10  years. 

The  right  is  reserved  to  call  for  additional  collateral  security  at 
any  time. 

The  approval  and  valuation  of  securities  is  committed  to  the  several 
Federal  Reserve  Banks,  acting  under  the  direction  of  the  Secretary 
of  the  Treasury.  The  withdrawal  of  securities,  the  pledge  of  addi- 
tional securities,  and  the  substitution  of  securities  shall  be  made 
from  time  to  time  as  required  or  permjitted  by  the  Federal  Reserve 
Banks  acting  under  like  direction. 

Special  Depositaries — Securities  Committees  and  Custody  of  Se- 
curities.— Each   Federal   Reserve   Bank   is   authorized   to   designate   a 


356 

committee,  or  committees,  to  be  composed  of  experienced  bankers,  in 
such  city  or  cities  in  its  district  as  may  be  deemed  necessary,  to  be 
known  as  the  securities  committee.  Each  securities  committee  shall 
consist  of  not  more  than  three  nor  less  than  two  members,  who  shall 
serve  without  compensation.  It  shall  be  the  duty  of  such  securities 
committee  to  examine  the  lists  of  securities  tendered  as  collateral 
security  for  deposits  and  to  transmit  them  promptly  to  the  Federal 
Reserve  Bank  of  the  district  with  the  committee's  recommendation. 
All  securities  accepted  as  collateral  security  for  deposits  hereunder 
must  be  deposited  with  the  Federal  Reserve  Bank  of  the  district  in 
which  the  depositary  is  located  or,  by  the  direction  and  subject  to 
the  order  of  such  Federal  Reserve  Bank,  with  a  custodian  or  custod- 
ians designated  by  it,  and  under  rules  and  regulations  prescribed 
by  it. 

Special  Depositaries — Making  and  Withdrawal  of  Deposits. — 'Each 
qualified  depositary  will  be  required  to  open  and  maintain  for  the 
account  of  tbe  Federal  Reserve  Bank  of  its  district,  as  fiscal  agent 
of  the  United  States,  a  separate  account  for  deposits  to  be  made 
hereunder,  to  be  known  as  the  "War  Loan  Deposit  Account." 

Qualified  depositaries  will  be  permitted  to  make  payment  by  credit 
when  due  of  amounts  payable  on  subscriptions  made  by  or  through 
them/  for  Treasury  certificates  of  indebtedness  and  for  Liberty  Bonds. 
In  order  to  make  payment  by  credit  the  depositary  must  notify  the 
Federal  Reserve  Bank  of  the  district  by  letter  or  telegram  to  reach 
it  on  or  before  the  date  when  such  payment  is  due,  and  must  on 
said  date  Issue  a  certificate  of  advice  to  such  Federal  Reserve  Bank 
stating,  that  a  sum  specified  (in  addition  to  all  other  amounts  stand- 
ing to  the  credit  of  said  fiscal  agent  with  such  depositary)  has  been 
deposited  with  such  depositary  for  the  account  of  such  Federal  Re- 
serve Bank,  as  fiscal  agent  of  the  United  States,  in  the  War  Loan 
Deposit  Account. 

The  unexpended  cash  proceeds,  if  any,  of  the  sale  of  any  issue  of 
certificates  or  bonds  will  be  deposited  among  the  qualified  depositaries 
as  nearly  as  may  be  in  proportion  to  the  subscriptions  made  by  and 
through  them  for  such  issue. 

All  deposits  and  withdrawals  will  be  made  by  the  Federal  Reserve 
Banks  by  direction  of  the  Secretary  of  the  Treasury. 

The  amount  deposited  with  any  depositary  shall  not  in  the  aggre- 
gate exceed  at  any  one  time  (c)  the  maximum  amount  for  which  it 
sball  have  been  designated  as  a  depositary,  nor  (6)  the  aggregate 
amount  of  the  collateral  security  pledged  by  it  taken  at  the  rates 
hereinbefore  provided.  All  deposits  will  be  payable  on  demand  with- 
out previous  notice. 


357 

Special  Depositaries — Interest  on  Deposits.— 'Each  depositary  will 
be  required  to  pay  interest  at  the  rate  of  2  per  cent,  per  annum  on  the 
average  daily  balance  maintained  during  the  period  of  the  deposit. 
Interest  payments  must  be  made  when  deposits  are  finally  withdrawn, 
but  not  less  frequently  than  quarterly. 

Special  Depositaries — Forms.- 
Form  H-2 — Public  Moneys. 

APPLICATION  FOR  DEPOSITS. 


To  the  Federal  Reserve  Bank  of....,  fiscal  agent  of  the  United  States: 
The  undersigned  bank  or  trust  company,  in  accordance  with  tbe 
provisions  of  Treasury  Department  Circular  No.  92,  dated  October  6, 
1917,  as  amended  and  supplemented  April  10,  1918,  and  pursuant  to 
due  action  of  its  board  of  directors,  hereby  makes  application  for 
the  deposit  of  public  moneys  with  it  from  time  to  time  under  the 
act  of  Congress  approved  September  24,  1917,  as  amended  by  the  act 
approved  April  4,  1918,  the  aggregate  amount  of  such  deposits  not 

to  exceed  at  any  one  time  $ ;   and  assigns  and  agrees  to 

pledge,  from  time  to  time,  to  and  with  the  Federal  Reserve  Bank  of 

.,  as  fiscal  agent  of  the  United  States,  as  collateral 

security  for  such  deposits  as  may  be  made  from  time  to  time  pursuant 
to  this  application,  securities  of  the  character  and  amount  required 
by  said  circular. 

i 

By 

President  (Vice  President). 

Street 

City  or  town . . , 

State , 

Form  J-2 — 'Public  Moneys. 

RESOLUTIONS  AUTHORIZING  APPLICATION  FOR  DEPOSITS. 

I  hereby  certify  that  the  following  resolutions  were  duly  adopted  at 
a  meeting  of  the  board  of  directors  of  the  below-named  bank   (trust 

company),  which  meeting  was  duly  called  and  duly  held  on  the 

day  of ,  192..,  a  quorum  being  present,  and  that  the  said 

resolutions  were  spread  upon  the  minutes  of  said  meeting: 

Resolved,  That,  in  accordance  with  the  provisions  of  Treasury  De- 
partment Circular  No.  92,  dated  October  6,  1917,  as  amended  and 
supplemented  April  10,  1918,  this  bank  (trust  company)  make  appli- 
cation for  the  deposit  of  public  moneys  with  it  from  time  to  time 


358 

under  the  act  of  Congress  approved  September  24,  1917,  as  amended 
by  the  act  approved  April  4,  1918,  the  aggregate  amount  of  such  de- 
posits not  to  exceed  at  any  one  time  $.  4 ;  and  assign  and 

agree  to  pledge  from  time  to  time  to  and  with  the  Federal  Reserve 

Bank  of i- .  •  • ,  as  fiscal  agent  «f  the  United  States,  as 

collateral  security  for  such  deposits  as  may  be  made  from  time  to 
time  pursuant  to  such  application,  securities  of  the  character  and 
amount  required  by  said  circular;  and 

Resolved,  That  the  president,  or  any  vice  president,  or  cashier,  or 
secretary,  of  the  undersigned  bank  (trust  company)  is  hereby  author- 
ized to  make  application,  assignment,  and  agreement  as  aforesaid  and 
from  time  to  time  to  deliver  to  and  pledge  with  said  Federal  Reserve 
Bank,  or  any  custodian  or  custodians  appointed  by  it,  securities  of 
the  undersigned  bank  (trust  company)  of  a  character  and  amount  at 
least  sufficient  to  secure  such  deposits  according  to  the  terms  of  said 
Treasury  Department  circular,  and  from  time  to  time  to'  withdraw 
securities  and  to  substitute  other  securitiesi  and  to  pledge  and  deposit 
additional  securities. 

In  witness  whereof  I  have  hereunto  signed  my  name  and  affixed 
the  seal  of  the of 

Cashier  (Secretary). 
Form  K — Public  Moneys. 

CERTIFICATE  OF  ADVICE. 


(Title  of  bank  or  trust  company.) 
(Location.) 


192. 


(Date.) 
I  hereby  certify  that  there  has  been  deposited  this  day  with  the 
above  bank    (trust  company),  to   the  credit  of  the   Federal   Reserve 

Bank  of ,  as  fiscal  agent  of  the  United  States, 

War  Loan  Deposit  Account,  to  be  held  subject  to  withdrawal  on  de- 
mand, the  sum  of .dollars,  consisting  of  payment  for 


f  principal 

Bonds-  • I  accrued  interest 


,  principal 

Certificates  of  indebtedness |accrued  interest 


Total  $ 

.  •  .i 

Cashier  or  Vice  President. 


359 

(The  depositary  will  forward  this  to  the  Federal  Reserve  Bank  of 
) 


Resolution  for  Withdrawal  of  Bonds  Held  to  Secure  Public  Moneys. 

At  a  meeting  of  the  Board  of  Directors  of  the Bank  of 

held  at  the  Banking  House,  ,  192 . .  the  following  resolution 

was  adopted: 

RESOLVED,  that  the  Treasurer  of  the  United   States  be,  and  he 

is   hereby,   authorized  to  withdraw   $ U.    S.   Bonds,   held   for 

account  of  this  Bank  as  security  for  public  moneys,  and  described  as 
follows : 

$ 4. .  of  the  Loan  of   , 

and  that   be,  and  is  hereby,  authorized  to'  sell,  assign,  and 

transfer   the   same,   and   to   appoint   one   or   more   attorneys   for  that 
purpose* 

I  hereby  certify  that  the  above  is  a  true  extract  from  the  minutes 
of  said  meeting. 
[Seal  of  bank] 

Cashier,  and  Secretary  of  the  Board  of  Directors. 

Note. — No'  official  of  the  Treasury  can  sell  or  assign  for  the  bank. 
The  bank's  agent  or  other  person  must  be  appointed. 

The  Treasurer's  receipts  for  the  bonds  to  be  withdrawn  must  be 
forwarded  to  the  Treasurer  with  this  resolution. 

Court  Bankruptcy  and  Post-Office  Funds. — Provision  is  made  in 
Sections  995  and  996,  Revised  Statutes,  that  "all  moneys  paid  into 
any  court  of  the  United  States  or  received  by  the  officers  thereof,  in 
any  case  pending  or  adjudicated  is  such  court,  shall  be  forthwith 
deposited  with  the  Treasurer,  an  Assistant  Treasurer,  or  a  Designated 
Depositary  of  the  United  States,  in  the  name  and  to  the  credit  of 
such  court:  Provided,  That  nothing  therein  shall  be  construed  to  pre- 
vent the  delivery  of  any  such  money  upon  security,  according  to 
agreement  of  parties,  under  the  direction  of  the  court."  But  that 
(Sec.  996,  R.  S.)  no  money  deposited  as  aforesaid  shall  be  withdrawn 
except  by  order  of  the  judge  or  judges  of  said  courts  respectively,  in 
term  or  in  vacation,  to'  be  signed  by  such  judge  or  judges,  and  to  be 
entered  and  certified  of  record  by  the  clerk;  and  every  such  order 
shall  state  the  .cause  in  or  on  account  of  which  it  is  drawn. 

But  moneys  in  court  deposited  in  a  designated  depositary  of  the 
-United  States  are  not  public  moneys  of  the  United  States  and  a 
court  cannot  order  such  bank  to  pay  to  a  party  to  a  suit  interest 
on  a  deposit  made  by  the  clerk  of  the  court.  (Chatham  &  Phoenix 
Nat.  Bank  v.  Guaranty  Trust  Co.,  256  Fed.  Rep.,  90.) 


360 

A  Court  of  Bankruptcy  shall  designate  by  order  banking  institu- 
tions as  depositaries  for  the  money  of  bankrupt  estates,  as  convenient 
as  may  be  to  the  residences  of  trustees;  and  shall  require  bonds  to 
the  United  States  subject  to  their  approval.  (Bankruptcy  Act,-  July  1, 
1898,  Vol.  30,  Sec.  61,  Chap.  7,  page  562.) 

National  bank  depositaries  designated  with  a  maximum  qualifica- 
tion for  the  sole  purpose  of  receiving  deposits  made  by  United  States 
Courts  and  their  officers,  by  postmasters  for  credit  to  their  official 
disbursing  accounts,  and  by  other  Government  officers  authorized  to 
maintain  disbursing  accounts  elsewhere  than  with  the  Treasurer  of 
the  United  States  are  not  authorized  to  receive  deposits  for  credit 
to  the  account  of  the  Treasurer  of  the  United  States.  Such  deposi- 
taries are  required  to  forward  to  the  Treasurer  of  the  United  States 
at  the  end  of  each  week,  and  at  the  end  of  each  month,  a  report  on 
Form  17  (National  Banks),  showing  the  aggregate  amounts  of  such 
deposits,  and  to  the  Secretary  of  the  Treasury,  Division  of  Public 
Moneys,  at  the  end  of  each  week,  and  at  the  end  of  each  month,  a 
report  on  Form  7  (National  Banks),  showing  in  detail  the  deposits 
to  the  credit  of  the  local  postmaster,  the  United  States  court  or  its 
officers,  and  other  authorized  special  accounts.  Bankruptcy  funds 
and  postal  savings  deposits  should  not  be  included  in  these  reports. 

§  323.  Penalty  for  Unauthorized  Deposit  of  Public  Money. — 
Whoever,  being  a  disbursing  officer  of  the  United  States,  or  a 
person  acting  as  such,  shall  in  any  manner  convert  to  his  own  use, 
or  loan  with  or  without  interest,  or  deposit  in  any  place  or  in  any 
manner,  except  as  authorized  by  law,  any  public  money  intrusted 
to  him ;  or  shall,  for  any  purpose  not  prescribed  by  law,  withdraw 
from  the  Treasurer  or  any  assistant  treasurer,  or  any  authorized! 
depositary,  or  transfer,  or  apply,  any  portion  of  the  public  money 
intrusted  to  him,  shall  be  deemed  guilty  of  an  embezzlement  of  the 
money  so  converted,  loaned,  deposited,  withdrawn,  transferred,  or 
applied,  and  shall  be  fined  not  more  than  the  amount  embezzled, 
or  imprisoned  not  more  than  ten  years,  or  both.  (Act  March  4, 
1909,  Sec.  87;  35  Stat.  U.  S.,  1105.) 

§  324.  Penalty  for  Unauthorized  Receipt  or  Use  of  Publio 
Money. —  See  §  177  under  National  Bank  Act,  page  181. 


CHAPTER  III. 

Postal  Savings  Depositories. 

Section  325.  Deposit  of  Postal  Savings  Funds  in  Banks — Mini- 
mum Pate  of  Interest — Security  Furnished  by- 
Banks,  etc. 

326.  Eepeal  of  Conflicting  Laws. 

327.  Prohibition   Against  Charge  of  Exchange,   etc.,   by 

Banks. 

328.  Postal  Savings  Bonds  Not  Receivable  As  Security  for 

Circulating  Notes. 

§  325.  Deposit  of  Postal  Savings  Funds  in  Banks — Minimum 
Rate  of  Interest — Security  Furnished  by  Banks,  etc. — That  postal 
savings  funds  received  under  the  provisions  of  this  act  shall  be 
deposited  in  solvent  banks,  whether  organized  under  National  or 
State  laws,  and  whether  member  banks  or  not  of  the  Federal  re- 
serve system  established  by  the  act  approved  December  twenty- 
third,  nineteen  hundred  and  thirteen,  being  subject  to  National  or 
State  supervision  and  examination,  and  the  sums  deposited  shall 
bear  interest  at  the  rate  of  not  less  than  two  and  one-fourth  per 
centum  per  annum,  which  rate  shall  be  uniform  throughout  the 
United  States  and  Territories  thereof ;  but  five  per  centum  of  such 
funds  shall  be  withdrawn  by  the  board  of  trustees  and  kept  with 
the  Treasurer  of  the  United  States,  who  shall  be  treasurer  of  the 
board  of  trustees,  in  lawful  money  as  a  reserve.  The  board  of 
trustees  shall  take  from  such  banks  such  security  in  public  bonds 
or  other  securities,  authorized  by  act  of  Congress,  or  supported  by 
the  taxing  power,  as  the  board  may  prescribe,  approve,  and  deem 
sufficient  and  necessary  to  insure  the  safety  and  prompt  payment 
of  such  deposits  on  demand.  The  funds  received  at  the  postal 
savings  depository  offices  in  each  city,  town,  village,  and  other  lo- 
cality shall  be  deposited  in  banks  located  therein  (substantially  in 

361 


363 

proportion  to  the  capital  and  surplus  of  each  such  bank)  willing 
to  receive  such  deposits  under  the  terms  of  this  act  and  the  regula- 
tions made  by  authority  thereof:  Provided,  however,  If  one  or 
more  member  banks  of  the  Federal  reserve  system  established  by 
the  act  approved  December  twenty-third,  nineteen  hundred  and 
thirteen,  exists  in  the  city,  town,  village,  or  locality  where  the 
postal  savings  deposits  are  made,  such  deposits  shall  be  placed  in 
such  qualified  member  banks  substantially  in  proportion  to  the 
capital  and  surplus  of  each  such  bank,  but  if  such  member  banks 
fail  to  qualify  to  receive  such  deposits,  then  any  other  bank  located 
therein  may,  as  hereinbefore  provided,  qualify  and  receive  the  same. 
If  no  such  member  bank  and  no  other  qualified  bank  exists  in  any 
city,  town,  village,  or  locality,  or  if  none  where  such  deposits  are 
made  will  receive  such  deposits  on  the  terms  prescribed,  then  such 
funds  shall  be  deposited  under  the  terms  of  this  act  in  the  bank 
most' convenient  to  such  locality.  If  no  such  bank  in  any  State  or 
Territory  is  willing  to  receive  such  deposits  on  the  terms  prescribed, 
then  such  funds  shall  be  deposited  with  the  treasurer  of  the  board 
of  trustees  and  shall  be  counted  in  making  up  the  reserve  of  five 
per  centum.  Such  funds  may  be  withdrawn  from  the  treasurer  of 
said  board  of  trustees,  and  all  other  postal  savings  funds,  or  any 
part  of  such  funds,  may  be  at  any  time  withdrawn  from  the  banks 
and  savings  depository  offices  for  the  repayment  of  postal  savings 
depositors  when  required  for  that  purpose.  If  at  any  time  the 
postal  savings  deposits  in  any  State  or  Territory  shall  exceed  the 
amount  which  the  qualified  banks  therein  are  willing  to  receive  un- 
der the  terms  of  this  act,  and  such  excess  amount  is  not  required 
to  make  up  the  reserve  fund  of  five  per  centum  hereinbefore  pro- 
vided for,  the  board  of  trustees  may  invest  all  or  any  part  of  such 
excess  amount  in  bonds  or  other  securities  of  the  United  States. 
When,  in  the  judgment  of  the  President,  the  general  welfare  and! 
interests  of  the  United  States  so  require,  the  board  of  trustees  may 
invest  all  or  any  part  of  the  postal  savings  funds,  except  the  reserve 
fund  of  five  per  centum  herein  provided  for,  in  bonds  or  other 
securities  of  the  United  States.  The  board  of  trustees  may  in  its 
discretion  purchase  from  the  holders  thereof  bonds  which  have 
been  or  may  be  issued  under  the  provisions  of  section  ten  of  the 


363 

act  of  June  twenty-fifth,  nineteen  hundred  and  ten.  Interest  and 
profit  accruing  from  the  deposits  or  investment  of  postal  savings 
funds  shall  be  applied  to  the  payment  of  interest  due  to  postal 
savings  depositors,  as  hereinbefore  provided,  and  the  excess  thereof, 
if  any,  shall  be  covered  into  the  Treasury  of  the  United  States  as 
a  part  of  the  postal  revenue:  Provided  further,  That  postal  sav- 
ings funds  in  the  treasury  of  said  board  shall  be  subject  to  dis- 
position as  provided  in  this  act,  and  not  otherwise:  And  provided 
further,  That  the  board  of  trustees  may  at  any  time  dispose  of 
bonds  held  as  postal  savings  investments  and  use  the  proceeds  to 
meet  withdrawals  of  deposits  by  depositors.  For  the  purpose  of 
this  act  the  word  "Territory"  as  used  herein  shall  be  held  to  include 
the  District  of  Columbia,  the  District  of  Alaska,  and  Porto  Eico, 
and  the  word  "bank"  shall  be  held  to  include  savings  banks  and 
trust  companies  doing  a  banking  business.  (Sec.  2,  Act  May 
18,  1916.) 

Eligibility  of  Banks. — The  Act  of  May  18,  1916  (amending  Sec.  9 
of  the  act  of  June  25,  1910),  prescribes  that  the  funds  received  at 
postal  savings  depositary  offices  in  each  city,  town,  village,  or  other 
locality  shall  be  deposited  in  solvent  banks  located  therein,  whether 
organized  under  National  or  State  laws,  and  whether  member  banks 
or  not  of  the  Federal  Reserve  System  established  by  the  Act  approved 
December  23,  1913,  being  subject  to  National  or  State  supervision  and 
examination,  willing  to  receive  such  deposits  under  the  terms  of  the 
Act  and  the  regulations  made  by  authority  thereof.  The  word  "bank" 
as  used  in  the  law  includes  savings  banks  and  trust  companies  doing 
a  banking  business. 

If  one  or  more  member  banks  of  the  Federal  Reserve  System  exist 
in  any  city,  town,  village,  or  locality  where  postal  savings  deposits 
are  made,  such  deposits  are  required  to  be  placed  in  such  member 
banks,  provided  they  qualify  to  receive  them,  substantially  in  propor- 
tion to  the  capital  and  surplus  of  each  such  bank;  but  if  such  member 
banks  fail  to  qualify  to  receive  the  deposits,  then  any  other  banks 
located  therein  and  eligible  as  hereinbefore  provided  may  qualify  to 
receive  them,  and  the  deposits  shall  be  placed  in  such  qualifying 
banks  substantially  in  proportion  to  their  capital  and  surplus.  If 
no  bank  eligible  to  qualify  exists  in  any  city,  town,  village,  or  locality, 
or  if  none  where  such  deposits  are  ma'de  will  receive  them  on  the 
terms  prescribed,  then  such  funds  shall  be  deposited  under  the  terms 
of  said  act  in  the  bank  most  convenient  to  such  locality.     If  no  such 


364 

bank  in  any  State  or  Territory  is  willing  to  receive  such  deposits  on 
the  terms  prescribed,  then  the  same  are  required  to  bei  deposited  with 
the  Treasurer  of  the  Board  of  Trustees.  The  law  requires  that  5  per 
centum  of  the  postal  savings  funds  shall  be  withdrawn  by  the  Board 
of  Trustees  and  kept  with  the  Treasurer  in  lawful  money  as  a  reserve. 

Quaijfication  of  Banks. — Any  eligible  bank  desiring  to  qualify  for 
deposits  of  postal  savings  funds  shall  transmit  to  the  Third  Assistant 
Postmaster  General,  Division  of  Postal  Savings,  Washington,  D.  C,  an 
application  accompanied  by  a  report  showing  fully  the  condition  of 
the  bank  on  a  day  not  more  than  one  month  prior  to  the  date  of  such 
application.  Such  report  shall  be  sworn  to  by  the  president  or  cashier 
and  attested  as  correct  by  two  members  of  the  board  of  directors,  who 
shall  also  certify  the  amount  of  paid-in  capital  and  unimpaired  surplus, 
exclusive  of  undivided  profits.  Blank  application  forms  may  be  ob- 
tained from  the  Third  Assistant  Postmaster  General,  Division  of  Postal 
Savings,  Washington,  D.  C.  No  deposits  will  be  made  in  any  bank 
until  it  shall  have  complied  with  these  provisions  and  deposited  securi- 
ties which  meet  the  requirements. 

Upon  receipt  of  the  application,  properly  completed,  from  a  bank 
authorized  to  qualify  under  the  law,  the  Third  Assistant  Postmaster 
General  will  inform  such  bank  of  the  initial  amount  of  bonds  or  other 
securities  which  it  will  be  required  to  deposit  as  security  for  postal 
savings  funds. 

A  minimum  initial  deposit  of  bonds  of  the  total  par  value  of  $5000 
will  be  required  from  a  bank  qualifying  at  a  first-class  postof&ce;  of 
the  total  par  value  of  $1000  at  a  second  or  third  class  office;  and  of 
the  total  par  value  of  $500  at  a  fourth  class  office;  but  no  deposit  of 
bonds  of  a  total  par  value  less  than  $500  will  be  accepted.  If  war- 
ranted by  the  anticipated  deposits,  greater  initial  amounts  of  securities 
than  those  above  specified  may  be  required. 

Bonds  or  securities  conforming  to  the  requirements  and  in  the 
amount  specified  in  the  notification  of  the  Third  Assistant  Postmaster 
General  shall  be  forwarded  by  the  bank  directly  to  the  Treasurer  of 
the  United  States,  Washington,  D.  C.* 

Either  registered  or  coupon  bonds  will  be  accepted,  but  all  registered 
bonds   shall   be    registered   in   the   name    of   "The    Treasurer   of   the 

*To  facilitate  examination  as  to  legal  acceptability  of  securities, 
banks  are  requested  to  forward,  at  the  time  the  securities  are  tendered, 
for  the  use  of  the  Solicitor  for  the  Postoffice  Department,  certified 
copies  of  final  legal  opinions  as  to  the  validity  of  such  securities,  or, 
if  such  opinions  are  not  available,  certified  transcripts  of  the  recorded 
proceedings,  including  certificates  covering  the  due  execution  and  sale 
of  such  bonds. 


365 

United  States,  in  trust  for  the —  Bank,  of  — < n-i  as  security 

for  postal  savings  funds."  The  Treasurer  of  the  United  States  will 
dispose  of  maturing  coupons  and  checks  covering  interest  accruing  on 
registered  bonds  as  directed  by  the  banks. 

The  Third  Assistant  Postmaster  General  will  inform  the  Treasurer 
of  the  United  States  of  the  amounts  of  securities  which  the  respective 
banks  are  required  to  deposit.  Upon  receipt  of  such  securities,  the 
Treasurer  shall  determine,  as  matter  of  fact,  whether  the  securities 
conform  to  the  requirements  of  these  regulations.  He  shall  then 
submit  a  statement  of  his  findings  to  the  Solicitor  for  the  Postoffice 
Department,  who  shall  determine,  as  matter  of  law,  whether  such 
securities  are  legally  acceptable  under  the  Act  of  May  18,  1916,  and 
the  regulations  herein  set  forth,  and  who  for  that  purpose  shall 
have  access  to  the  securities.  No  securities  shall  be  accepted  until 
their  legal  acceptability  has  been  determined  by  the  Solicitor  for  the 
Postoffice  Department. 

If  such  bonds  are  accepted,  the  Treasurer  shall  issue  his  receipt 
therefor  in  duplicate,  forwarding  the  original  to  the  Third  Assistant 
Postmaster  General  with  advice  of  his  action,  and  the  duplicate  to 
the  bank  depositing  the  securities.  If  the  bonds  are  held  not  to 
conform  to  the  requirements  of  the  law  or  these  regulations,  they 
shall  be  retained  subject  to  the  order  and  at  the  risk  of  the  bank  for 
whose  account  they  were  tendered,  and  the  bank  so  notified.  If  the 
bonds  are  insufficient  in  amount,  the  bank  shall  be  requested  by  the 
Treasurer  to  furnish  additional  bonds. 

On  receipt  of  notice  from  the  Treasurer  of  the  United  States  that 
the  securities  required  of  any  bank  have  been  received  and  accepted, 
the  Third  Assistant  Postmaster  General  will  notify  such  bank  that 
it  has  qualified  to  receive  deposits  of  postal  savings  funds.  He  will 
state  the  amount  fixed  as  the  maximum  balance  which  may  be  held 
by  such  bank,  and  will  instruct  the  proper  postmaster  to  make  de- 
posits therein. 

Secubity  fob  Deposits. — The  Board  of  Trustees  prescribes  and  ap- 
proves such  security  in  public  bonds  or  other  securities,  authorized  by 
act  of  Congress  or  supported  by  the  taxing  power,  as  it  deems  sufficient 
and  necessary  to  insure  the  safety  and  prompt  payment  on  demand  of 
postal  savings  deposits,  and  fixes  the  value  at  which  the  securities  so 
prescribed  and  approved  shall  be  accepted  for  the  purposes  named. 
Such  securities,  in  the  amount  so  specified,  shall  bo  deposited  with 
the  Treasurer  of  the  Board  of  Trustees. 

The  Board  of  Trustees  will  accept  as  security  for  postal  savings 
deposits,  at  the  respective  values  herein  fixed,  negotiable  interest- 
bearing  bonds  or  securities,  issued  under  express  constitutional  or 
statutory  provisions,  of  the  following  classes,  viz.: 


366 

(a)  Bonds  of  the  United  States,  of  the  Philippine  Islands,  of  the 
District  of  Columbia,  and  of  Porto  Rico,  will  be  accepted  at  their 
par  value. 

(b)  Bonds  of  any  State  of  the  United  States  and  of  the  Territory  of 
Hawaii  will  be  accepted  at  their  market  value,  but  if  such  market 
value  is  above  par,  they  will  be  accepted  at  their  par  value. 

(c)  Bonds  of  any  city  or  county  in  the  United  States  having  a 
population  of  over  30,000  as  shown  by  the  latest  reports  of  the  Bureau 
of  the  Census,  and  bonds  of  any  school  district  in  the  United  States 
in  which  the  whole  or  the  major  portion  of  any  such  city  is  in- 
cluded, which  city,  county,  or  school  district  has  been  in  existence 
for  a  period  of  ten  years,  which  for  a  period  of  ten  years  previously 
has  not  defaulted  in  the  payment  of  any  part  of  either  principal  or 
interest  of  any  funded  debt  authorized  to  be  contracted  by  it,  and 
whose  net  funded  indebtedness  does  not  exceed  10  per  cent,  of  the 
valuation  of  its  taxable  property,  to  be  ascertained  by  the  last  pre- 
ceding valuation  for  the  assessment  of  taxes,  will  be  accepted  at  90 
per  cent,  of  their  market  value,  but  if  such  market  value  is  above 
par,  they  will  be  accepted  at  90  per  cent,  of  their  par  value. 

(d)  Bonds  of  any  city,  town,  borough,  or  village  in  the  United 
States,  having  a  population  of  over  20,000  and  not  exceeding  30,000, 
as  shown  by  the  latest  reports  of  the  Bureau  of  the  Census,  and  bonds 
of  any  school  district  in  the  United  States  in  which  the  whole  or 
the  major  portion  of  any  such  municipality  is  included,  which  city, 
town,  borough,  village,  or  school  district  has  been  in  existence  for 
a  period  of  ten  years,  which  for  a  period  of  ten  years  previously  has 
not  defaulted  in  the  payment  of  any  part  of  either  principal  or 
Interest  of  any  funded  debt  authorized  to  be  contracted  by  it,  and 
whose  net  funded  indebtedness  does  not  exceed  10  per  cent,  of  the 
valuation  of  its  taxable  property,  to  be  ascertained  by  the  last  pre- 
ceding valuation  for  the  assessment  of  taxes,  will  be  accepted  at  80 
per  cent,  of  their  market  value,  but  if  such  market  value  is  above 
par,  they  will  be  accepted  at  80  per  cent,  of  their  par  value. 

(e)  Bonds  of  any  other  city,  town,  county,  or  other  legally  consti- 
tuted municipality  or  district  in  the  United  States,  which  has  been 
in  existence  for  a  period  of  ten  years,  which  for  a  period  of  ten 
years  previously  has  not  defaulted  in  the  payment  of  any  part  of 
either  principal  or  interest  of  any  funded  debt  authorized  to  be  con- 
tracted by  it,  and  whose  net  funded  indebtedness  does  not  exceed 
10  per  cent,  of  the  valuation  of  its  taxable  property,  to  be  ascertained 
by  the  last  preceding  valuation  for  the  assessment  of  taxes,  will  be 
accepted  at  75  per  cent,  of  their  market  value,  but  if  such  market 
value  is  above  par,  they  will  be  accepted  at  75  per  cent,  of  their 
par  value. 


367 

The  term  "net  -funded  indebtedness"  for  the  purposes  of  (c),  (d), 
and  (e)  above,  is  hereby  defined  to  be  the  difference  between  the 
legal  gross  indebtedness  of  a  city,  town,  county,  or  other  legally 
constituted  municipality  or  district  (including  the  amount  of  the 
bonds  of  any  civil  division  whose  territorial  limits  are  approximately 
coterminous  therewith)  and  the  aggregate  of  the  following  items, 
when  included  in  such  legal  gross  indebtedness: 

(a)  The  total  of  all  sinking  funds  accumulated  for  the  redemption 
of  such  gross  indebtedness,  except  sinking  funds  applicable  to  bonds 
hereafter  described  in  this  section. 

(5)  The  amount  of  outstanding  bonds  or  other  debt  obligations, 
made  payable  from  current  revenues. 

(c)  The  amount  of  outstanding  bonds  issued  for  the  purpose  of 
providing  the  inhabitants  of  a  municipality  with  public  utilities:  Pro- 
vided, That  evidence  is  submitted  showing  that  the  income  from  such 
utilities  has  proved  to  be  sufficient  for  maintenance,  for  payment  of 
interest  on  such  bonds,  and  for  the  accumulation  of  a  sinking  fund  for 
their  redemption. 

(d)  The  amount  of  outstanding  improvement  bonds,  issued  under 
laws  which  provide  for  the  levying  of  special  assessments  against 
abutting  property:  Provided,  That  evidence  is  submitted  showing  that 
assessments  are  levied  in  sufficient  amounts  to  insure  the  payment  of 
interest  on  the  bonds  and  the  redemption  thereof. 

The  Board  of  Trustees  reserves  the  right  to'  reclassify  the  secu- 
rities acceptable  for  deposits  and  to  change  the  valuation  at  which 
they  will  be  accepted.  Under  no  circumstances  will  securities  of  other 
classes  than  those  above  named  be  accepted. 

Bonds  of  the  several  classes  described  in  (&),  (c),  (d),  and  (e),  to 
be  acceptable  as  security,  shall  be  the  general  obligations  of  the 
States,  Territories,  counties,  cities,  towns,  or  other  political  divisions 
by  or  in  behalf  of  which  they  are  issued,  and  payable,  either  directly 
or  ultimately,  without  limitation  to  a  special  fund,  from  the  proceeds 
of  taxes  authorized  to  be  levied  upon  all  the  taxable  real  and  personal 
property  within  the  territorial  limits  of  such  political  divisions:  Pro- 
vided, That  in  any  case  where  the  rate  of  tax  may  be  subject  to  a  con- 
stitutional or  statutory  limit,  the  Solicitor  for  the  Postoffice  Depart- 
ment may  require  satisfactory  evidence  that,  notwithstanding  such 
limit,  the  interest  and  principal  of  the  bonds  can  be  paid  after 
making  due  provision  for  current  expenses,  interest  and  principal 
of  outstanding  debts,  and  other  necessary  charges. 

Obligations  of  the  general  class  embracing  what  are  commonly 
known  as  "revenue  bonds,"  "temporary  bonds,"  "temporary  notes," 
"certificates  of  indebtedness,"  "warrants,"  and  the  like  obligations, 
whether  issued  in  anticipation  of  tho  collection  of  taxes,  assessments, 


368 

or  other  revenues,  or  of  the  sale  of  bonds  or  other  obligations,  or  for 
similar  purposes,  will  not  be  accepted  as  security  for  postal  savings 
deposits:  Provided,  That,  In  applying  this  regulation,  consideration 
will  be  given  to  the  legal  status  of  the  obligations  submitted  rather 
than  to  the  nomenclature  employed  in  designating  such  obligations. 

Bonds  which  In  all  other  respects  are  found  to  be  legally  acceptable 
as  security  under  the  postal  savings  act  and  these  regulations  will 
be  construed,  as  a  matter  of  law,  to  conform  to  those  provisions  men- 
tioned above  which  relate  to  term  of  existence  and  nondefault,  under 
the  following  conditions: 

(a)  Bonds  issued  by  or  in  behalf  of  any  city,  town,  county,  or 
other  legally  constituted  municipality  or  district  in  the  United  States 
which  was,  subsequently  to  the  issuance  of  such  bonds,  consolidated 
with,  or  merged  into,  an  existing  political  division  which  meets  the 
requirements  of  these  regulations,  will  be  deemed  to  be  the  bonds  of 
such  political  division:  Provided,  that  such  bonds  were  assumed  by 
such  political  division  under  the  statutes  and  appropriate  proceedings 
the  effect  of  which  is  to  make  such  bonds  general  obligations  of  such 
assuming  political  division,  and  payable,  either  directly  or  ultimately, 
without  limitation  to  a  special  fund,  from  the  proceeds  of  taxes  levied 
upon  all  the  taxable  real  and  personal  property  within  its  territorial 
limits. 

(6)  Bonds  issued  by  or  in  behalf  of  any  city,  town,  county,  or  other 
legally  constituted  municipality  or  district  of  the  United  States  which 
was,  subsequently  to  the  issuance  of  such  bonds,  wholly  succeeded  by 
a  newly  organized  political  division,  who'se  term  of  existence,  added 
to  that  of  such  original  political  division,  or  of  any  other  political 
division  so  succeeded,  is  equal  to  a  period  of  10  years,  will  be  deemed 
to  be  bonds  of  such  succeeding  political  division:  Provided,  That 
during  such  period  none  of  such  political  divisions  shall  have  de- 
faulted in  the  payment  of  any  part  of  either  principal  or  interest  of 
any  funded  debt  authorized  to  be  contracted  by  it.  And  provided  fur- 
ther, That  such  bonds  were  assumed  by  such  new  political  division 
under  statutes  and  appropriate  proceedings  the  effect  of  which  is  to 
make  such  bonds  general  obligations  of  such  assuming  political  divis- 
ion, and  payable,  either  directly  or  ultimately,  without  limitation  to 
a  special  fund,  from  the  proceeds  of  taxes  levied  upon  all  the  taxable 
real  and  personal  property  within  its  territorial  limits. 

(c)  Bonds  issued  by  or  in  behalf  of  any  city,  town,  county,  or  other 
legally  constituted  municipality  or  district  in  the  United  States  which, 
prior  to  such  issuance,  became  the  successor  of  one  or  more,  or  was 
formed  by  the  consolidation  or  merger  of  two  or  more,  pre-existing 
political  divisions,  the  term  of  existence  of  one  or  more  of  which, 
added  to  that  of  such  succeeding  or  consolidated  political  division,  is 


369 

equal  to  a  period  of  10  years,  will  be  deemed  to  be  bonds  of  a  po- 
litical division  which  has  been  in  existence  for  a  period  of  10  years: 
Provided,  That  during  such  period  none  of  such  original,  succeeding, 
or  consolidated  political  divisions  shall  have  defaulted  in  the  pay- 
ment of  any  part  of  either  principal  or  interest  of  any  funded  debt 
authorized  to  be  contracted  by  it. 

The  Treasurer  of  the  Board  of  Trustees  shall  make  examinations 
semiannually,  or  oftener  if  he  deems  it  necessary,  of  the  securities 
which  have  been  accepted  from  qualified  banks,  and  whenever,  in  his 
judgment,  any  of  such  securities  have  so  far  depreciated  in  value 
as  to  make  desirable  the  deposit  of  additional  or  new  securities,  he 
shall  inform  the  Third  Assistant  Postmaster  General  of  the  name 
of  the  bank,  the  kind  and  amount  of  the  securities,  and  the  amount 
of  the  depreciation.  The  Third  Assistant  Postmaster  General  will 
notify  the  Treasurer  and  the  bank  of  the  amount  of  additional  or 
new  securities  which  the  bank  shall  deposit,  and  upon  their  receipt 
by  the  Treasurer,  the  procedure  provided  as  to  their  acceptance  or 
rejection,  and  as  to  the  return  of  the  original  securities,  if  new  secu- 
rities are  required,  shall  be  followed. 

Apportionment  of  Deposits. — When  more  than  one  bank  in  any 
city,  town,  village,  or  locality  has  qualified  to  receive  postal  savings 
funds,  deposits,  of  such  funds  shall  be  apportioned  substantially  upon 
the  basis  of  capital  and  surplus  as  required  by  the  Act  of  May  18, 
1916,  and  shall  be  made  to  the  credit  of  the  Board  of  Trustees  in 
such  rotation  and  amounts  as  will  effect  such  apportionment,  until 
the  deposits  reached  the  maximum  balance  authorized  for  any  bank. 
The  banks  concerned  will  be  fully  informed  in  the  premises. 

An  apportionment  of  postal  savings  funds  will  apply  in  the  case 
of  each  qualified  bank  only  to  funds  deposited  after  the  date  as  of 
which  the  bank  qualified. 

After  any  apportionment  of  funds  has  been  made  in  a  given  locality, 
no  other  bank  will  be  allowed  to  qualify  to  receive  postal  savings 
deposits  except  as  of  the  1st  day  of  January,  April,  July,  or  October, 
unless  the  maximum  amount  of  deposits  applied  for  by  the  banks 
already  qualified  has  been  reached  and  such  banks  have  not  qualified 
for  additional  funds.  When  a  qualified  member  bank  of  the  Federal 
Reserve  System  in  which  the  deposits  have  reached  the  maximum 
authorized  balance  declines  or  fails  to  furnish  additional  collateral 
and  a  local  nohmember  bank  qualifies  to  receive  deposits,  the  member 
bank  must  await  the  next  quarterly  reapportionment  date  before  qual- 
ifying for  additional  funds.  Applications  to  qualify  under  a  reappor- 
tionment of  the  funds  of  any  depository  office  shall  be  forwarded 
in  sufficient  time  to  reach  the  Third  Assistant  Po'stmaster  General, 
24 


370 

Division  of  Postal  Savings,  before  the  15th  day  of  December,  March, 
June,  or  September. 

When  the  capital  or  surplus  of  a  depository  bank  is  increased  or 
reduced  after  it  has  qualified  as  a  depository,  the  president  or  cashier 
shall  promptly  certify  to  the  Third  Assistant  Postmaster  General,  Di- 
vision of  Postal  Savings,  the  amount  of  such  bank's  paid-in  capital 
and  unimpaired  surplus,  exclusive  of  undivided  profits,  after  such  in- 
crease or  reduction,  in  order  that  proper  reapportionment  of  the  de- 
posits may  be  made  among  the  banks  affected  as  of  the  dates  first 
above  named. 

Interest. — Until  further  notice,  banks  which  have  qualified  to  receive 
deposits  of  postal  savings  funds  will  be  required  to  credit  the  Board 
of  Trustees  with  interest  at  the  rate  of  two  and  one-half  per  cent,  per 
annum,  as  of  January  1  and  July  1  in  each  year,  upon  the  average 
daily  balances  of  postal  savings  funds  deposited  with  such  banks,  as 
shown  by  the  audited  accounts  of  postmasters  and  other  agents  of 
the  Postal  Savings  System.  Such  interest  shall  be  computed  and 
entered  as  required  by  instructions  on  the  back  of  Form  PS  510. 

The  Board  of  Trustees  will,  from  time  to  time,  make  such  changes 
in  the  rate  of  interest  to  be  paid  by  qualified  banks  as  it  may  deem 
proper,  subject  to  the  minimum  rate  prescribed  by  the  Act  of  May  18, 
1916,  the  rate  adopted  being  uniform  throughout  the  United  States 
and  Territories  thereof. 

Deposits  of  Funds  in  Banks. — Postmasters  who'  deposit  in  qualified 
banks  will  be  instructed  to  make  all  such  deposits  to  the  credit  of 
the  Board  of  Trustees,  Postal  Savings  System,  and  will  be  required 
to  make  daily  deposits  of  all  excess  postal  savings  receipts  amounting 
to  $10  or  more,  except  on  the  25th  day  of  each  month,  when  all  cash 
on  hand  amounting  to  $1  or  more  shall  be  deposited. 

On  receipt  of  a  deposit  of  such  funds  the  bank  shall  issue  a  cer- 
tificate of  deposit,  in  duplicate,  on  Form  PS  400,  in  the  name  of  the 
postmaster  or  other  officer  or  agent  making  the  deposit.  The  duplicate 
shall  be  immediately  delivered  or  forwarded  to  the  postmaster  or 
other  officer  or  agent  making  the  deposit  and  the  original  certificates 
shall  be  forwarded  by  the  bank  at  the  close  of  each  calendar  week 
to  the  Third  Assistant  Postmaster  General,  Division  of  Postal  Savings. 
All  original  certificates  on  hand  at  the  end  of  a  month,  even  though 
covering  only  part  of  a  week,  shall  be  forwarded.  Qualified  banks 
will  be  supplied  with  blank  certificates,  Form  PS  400, 

Excess  Deposits. — If  any  postmaster  shall  deposit  in  a  qualified 
bank  an  amount  in  excess  of  the  maximum  balance  authorized,  such 
bank  shall  immediately  notify  the  Third  Assistant  Postmaster  General, 


371 

Division  of  Postal  Savings,  and,  until  otherwise  directed,  shall  tranfer 
such  excess  at  the' close  of  business  each  day  to  the  Treasurer  of  the 
United  States  at  Washington  or  to  the  Assistant  Treasurer  of  the 
United  States  in  one  of  the  following  cities:  New  York,  Philadelphia, 
Boston,  Baltimore,  Cincinnati,  Chicago,  St.  Louis,  New  Orleans,  or 
San  Francisco.  Such  transfer  shall  be  made  to  the  credit  of  the  "Board 
of  Trustees,  Postal  Savings  System,  on  account  of  returnable  deposits." 
Should  additional  funds  beyond  the  amount  for  which  a  bank  has 
qualified  become  available  for  deposit,  the  bank,  in  order  to  receive 
further  deposits,  will  be  required  to  furnish  additional  securities  in 
the  manner  heretofore  provided.  When  the  volume  of  deposits  in 
a  qualified  bank  approaches  the  maximum  balance  which  it  is  au- 
thorized to  receive,  and  it  appears  that  funds  will  be  available  in  the 
near  future  for  deposit  in  excess  of'  such  balance,  the  bank  may,  if  it 
so  desires,  forward  additional  bonds  directly  to  the  Treasurer  of  the 
United  States  without  awaiting  instructions  from  the  Third  Assistant 
Postmaster  General,  who  should,  however,  be  promptly  notified  of  such 
action. 

Withdrawals  by  Postmasters. — All  postal  savings  funds  are  re- 
quired to  be  deposited  to  the  credit  of  the  Board  of  Trustees.  In 
order  to  provide  a  postmaster  who'  deposits  in  bank  with  funds  for 
meeting  withdrawals  by  depositors,  one  bank,  especially  designated 
for  the  purpose,  will  be  authorized  to  honor  his  official  checks,  drawn 
against  the  Board  of  Trustees'  account,  and  not  exceeding  a  specified 
amount  in  any  one  calendar  month.  The  amount  of  the  credit  thus 
fixed  may  be  added  to  the  proportion  of  deposits  assigned  to  the  desig- 
nated bank,  but  shall  be  secured  by  bonds,  subject  to  the  payment  of 
interest,  and  included  in  the  maximum  balance  which  such  bank  is 
authorized  to  receive.  Such  credit  may  be  increased  from  time  to 
time  by  the  Third  Assistant  Postmaster  General. 

Withdrawals  by  Board  of  Trustees. — Whenever  postal  savings 
funds  are  to  be  withdrawn  from  a  qualified  bank  by  the  Board  of 
Trustees  for  investment  in  bonds  or  other  securities  of  the  United 
States,  or  for  other  purposes,  the  Third  Assistant  Postmaster  General 
will  draw  a  draft  on  the  bank,  or  will  direct  the  bank  to  deposit  the 
required  amount  to  the  credit  of  the  "Board  of  Trustees,  Postal  Sav- 
ings System,"  with  the  Treasurer  or  an  assistant  treasurer  of  the 
United  States,  or  other  authorized  agent. 

On  receipt  of  such  deposit  the  Treasurer,  assistant  treasurer,  or- 
other  agent  shall  issue  a  certificate  of  deposit  in  duplicate  in  the  name 
of  the  depositing  bank,  and  forward  the  original  certificate  to  the 
Third  Assistant  Postmaster  General,  Division  of  Postal  Savings,  and 
the  duplicate  to  the  bank. 


372 

Withdrawals  of  Securities  by  Banks. — Whenever  a  bank  desires 
to  relinquish  the  whole  or  a  part  of  its  postal  savings  deposits  or  to 
withdraw  such  of  its  securities  as  do  not  cover  deposits,  it  shall  notify 
the  Third  Assistant  Postmaster  General,  Division  of  Postal  Savings, 
and  shall  forward  to  him  the  duplicate  receipt  or  receipts  issued  by 
the  Treasurer  of  the  United  States  at  the  time  the  securities  were 
deposited,  together  with  a  duly  attested  and  certified  copy  of  a  resolu- 
tion of  its  board  of  directors  authorizing  such  withdrawal  and  speci- 
fying the  disposition  to  be  made  of  the  securities. 

The  Third  Assistant  Postmaster  General  will  direct  the  bank  as  to 
the  disposition  to  be  made  of  the  relinquished  depo'sits,  and  after  such 
disposition  will  transmit  both  the  original  and  duplicate  receipts  to 
the  Treasurer  of  the  United  States,  who  shall  then  dispose  of  the 
bonds  as  directed  by  the  bank. 

If  the  entire  amount  of  securities  deposited  is  not  withdrawn,  the 
Treasurer  shall  return  the  receipts  to  the  Third  Assistant  Postmaster 
General,  indorsing  thereon  the  amount  of  securities  withdrawn,  and 
the  Third  Assistant  Postmaster  General  will  transmit  the  duplicate 
receipt  to  the  bank.  If  the  entire  amount  of  securities  deposited  is 
withdrawn,  the  receipts  shall  be  cancelled  and  retained  by  the 
Treasurer. 

Registered  bonds  withdrawn  for  any  reason  shall  be  assigned  by 
the  Treasurer  directly  to  the  bank  for  whose  account  they  were  pre- 
viously held,  except  in  the  cases  hereafter  mentioned,  and  except 
where  United  States  bonds  are  called  for  redemption,  in  which  case 
they  shall  be  assigned  directly  to  the  Secretary  of  the  Treasury. 

If  the  duplicate  receipt  issued  to  a  bank  covering  securities  deposited 
shall  be  lost,  stolen,  or  destroyed,  and  can  not  be  produced  when  a 
withdrawal  of  bonds  is  to  be  made,  an  affidavit  setting1  forth  the  facts 
shall  be  executed  by  an  officer  of  the  bank  and  forwarded  to  the  Third 
Assistant  Postmaster  General,  who  may  authorize  the  Treasurer  of 
the  United  States  to  accept  such  affidavit  in  lieu  of  the  missing  receipt. 

When  a  bank  desires  to  substitute  securities  in  lieu  of  those  already 
deposited,  it  shall  notify  the  Third  Assistant  Postmaster  General,  Di- 
vision of  Postal  Savings,  inclosing  the  Treasurer's  duplicate  receipt 
for  the  bonds  to  be  withdrawn,  and  a  duly  certified  and  attested  copy 
of  a  resolution  of  its  board  of  directors  authorizing,  such  substitution. 
The  Third  Assistant  Postmaster  General  will  then  forward  to  the 
Treasurer  both  the  original  and  duplicate  receipts  for  the  bonds  to 
be  withdrawn  and  direct  the  bank  to  forward  to  the  Treasurer  the 
securities  to  be  substituted.  If  they  are  accepted,  the  Treasurer  shall 
issue  new  receipts  to  the  Third  Assistant  Postmaster  General  and  to 
the  bank  and  dispose  of  the  securities  withdrawn  as  requested  by 
the   bank. 


373 

When  banks  desire  to  exchange  with  one  another  securities  de- 
posited by  them,  they  shall  forward  to  the  Third  Assistant  Postmaster 
General  lists  of  such  securities,  accompanied  by  duly  attested  and 
certified  copies  of  resolutions  of  their  boards  of  directors  authorizing 
such  exchanges  and  the  Treasurer's  duplicate  receipts  covering  such 
securfties.  If  the  exchanges  are  approved,  the  Third  Assistant  Post- 
master General  will  so  inform  the  Treasurer,  who  shall  simultaneously 
withdraw  from  deposit  and  assign  the  securities  and  redeposit  them 
for  account  of  the  respective  banks,  issuing  new  receipts  in  duplicate 
therefor. 

Resolution  for  Withdrawal  of  Bonds  Held  as  Security  for  Postal- 
Savings  Funds. — 

At  a  meeting  of  the  Board  of of  the Bank 

of ....held   at   their   banking   house.., 192..,    the   following 

resolutions  were  adopted'. 

Resolved,  that  the  Board  of  Trustees  of  the  Postal  Savings  System 

be,  and  they  are  hereby,  authorized  to  withdraw  $ bonds,  held 

by  the  Treasurer  of  the  United  States:  in  trust,  as  security  for  postal- 
savings  funds,  and  described  as  follows: 


$ of  the  Loan  of. 

$ of  the  Loan  of. 

$ of  the  Loan  of. 

$ of  the  Loan  of. 


and  that  the  Treasurer  of  the  United  States  is  hereby  authorized  to 
forward   said    bonds   to 

Resolved,  That , be,  and  is  hereby,  author- 
ized to  sell,  assign,  and  transfer  the  same  and  to  appoint  one  or  more 
attorneys  for  that  purpose. 

I  Hereby  cretify  that  the  above  is  a  true  extract  from  the  minutes 
of  said  meeting. 

impress  i 

corporate  seal  Secretary  of  the  Board  of 

HERE 

N.  B. — This  resolutien  should  be  properly  executed  and  certified,  with 
the,  seal  of  the  bank  impressed,  and  forwarded  to  the  Board  of  Trus- 
tees of  the  Postal  Savings  System,  Washington,  D.  C.,  whenever  bonds 
held  as  security  for  postal-savings  funds  are  to  be  withdrawn,  to- 
gether with  the  Treasurer's  receipt  covering  the  bonds  to  be  with- 
drawn. 


374 

The  person  authorized  to  assign  the  bonds  should  not  be  the  person 
who  certifies  to  the  above  resolution. 

Failure  of  Banks  to  Repay  Deposits  or  Otherwise  to  Orserye  Reg- 
ulations.— Any  qualified  bank  which  shall  fail  to  comply  with  these 
regulations  shall  be  liable  to  be  disqualified.  In  the  event  of  such 
disqualification  the  Third  Assistant  Postmaster  General  will  direct 
the  bank  as  to  the  disposition  to  be  made  of  its  postal  savings  deposits. 

If  a  qualified  bank  shall  fail  or  decline  to  repay  postal  savings  de- 
posits and  accrued  interest  thereon,  when  so  required  by  the  Third 
Assistant  Postmaster  General,  he  will  authorize  and  direct  the  Treas- 
urer of  the  United  States  to  invite  bids  for  the  purchase  of  securities 
deposited  by  such  bank  and  to  sell  such  portion  thereof  as  may  be 
necessary  to  reimburse  the  Board  of  Trustees  in  the  amount  which 
the  bank  has  failed  or  declined  to  pay,  and  to  assign  and  deliver  such 
securities  to  the  purchaser  upon  payment  therefor.  The  proceeds  from 
such  sale  shall  be  deposited  by  the  Treasurer  to  the  credit  of  the  Board 
of  Trustees  as  directed  by  the  Third  Assistant  Postmaster  General. 
Any  portion  of  such  securities  or  the  proceeds  thereof  remaining 
after  the  Board  of  Trustees  has  been  fully  reimbursed  shall  be 
returned  to  the  bank  or  to  its  receiver  or  other  legal  representative. 

If  it  shall  appear  to  the  Treasurer  that  the  immediate  sale  of  such 
securities  as  above  provided  would  not  realize  a  sufficient  amount  to 
reimburse  fully  the  Board  of  Trustees  he  shall  so  inform  the  Third 
Assistant  Postmaster  General,  who  may  direct  that  such  sale  be 
deferred.. 

Reports. — At  the  close  of  each  month,  or  oftener  if  required,  each 
qualified  bank  shall  render  to  the  Third  Assistant  Postmaster  General, 
Division  of  Postal  Savings,  a  statement  on  Form  PS  510  of  the  postal 
savings  fund  account  as  shown  by  its  books,  giving  all  information 
called  for  by  said  form,  a  supply  of  which  will  be  furnished  to  each 
bank.  This  report  is  necessary  for  the  audit  of  the  accounts  of 
postmasters  and  banks,  and  shall  be  rendered  in  every  case  when  funds 
are  on  deposit,  even  though  no  transactions  occurred  during  the  month. 
Each  bank  shall  forward  all  paid  checks  or  drafts  with  the  monthly 
statement  of  account  in  which  credit  is  claimed  for  their  payment. 

Each  bank  shall  furnish  at  any  time  to  a  duly  authorized  representa- 
tive of  the  Board  of  Trustees  any  information  requested  as  to  its  postal 
savings  transactions. 

Advertisements  by  Banks. — A  qualified  bank  may  advertise  that  it 
is  a  "United  States  depository  for  postal  savings  funds,"  but  no  other 
form  of  advertisement  is  authorized  by  the  Board  of  Trustees. 


375 

§  326.  Repeal  of  Conflicting  Laws.—  That  all  laws  or  parts  of 
laws  in  conflict  with  the  provisions  of  this  act  are  hereby  repealed. 
(Sec.  17,  Act  May  18,  1916.) 

§  327.  Prohibition  Against  Charge  of  Exchange,  etc.,  by  Banks. 
— No  bank  in  which  postal  savings  funds  shall  be  deposited  shall 
receive  any  exchange  ©r  other  fees  or  compensation  on  account  of 
the  cashing  or  collection  of  any  checks  or  the  performance  of  any 
other  service  in  connection  with  the  postal  savings  depository 
system.     (Sec.  8,  Act  June  25,  1910.) 

§  328.  Postal  Savings  Bonds  Not  Receivable  As  Security  for 
Circulating  Notes.—  That  no  bonds  authorized  by  this  act  shall  be 
receivable  by  the  Treasurer  of  the  United  States  as  security  for  the 
issue  of  circulating  notes  by  National  banking  associations.  (Sec. 
10,  Act  June  25,  1910.) 


CHAPTER  IV. 
Currency  and  Monet. 

Section  329.  Gold  Dollar  As  Standard  Unit  of  Value. 

330.  Maintenance  of  Gold  Reserve  of  One  Hundred  and 

Fifty  Million — Sale  of  Bonds  to  Replenish  Re- 
serve. 

331.  Establishment  of  Divisions  of  Issue  and  of  Redemp- 

tion. 

332.  Cancellation  of  Treasury  Notes  and  Issue  of  Silver 

Certificates. 

333.  Issue  of  Gold  Certificates. 

334.  Issue  of  Silver  Certificates, 

335.  Subsidiary  Silver  Coinage. 

336.  Recoinage  of  Uncurrent  Subsidiary  Silver  Coin. 

337.  Melting  of  Silver  Dollars— Sale  of  Bullion. 

338.  Purchase  of  Silver  Ore. 

339.  Sales  of  Silver  Bullion — Purposes  of. 

340.  Reimbursement  for  Loss  in  Melting  Silver  Dollars. 

341.  Federal  Reserve  Bank  Notes — Issuance  of  to  Prevent 

Contraction  of  Currency. 

342.  Federal   Reserve  Bank  Notes — Retirement  of — Tax 

on. 

343.  Exportation  of  Silver  Coin  or  Bullion. 

344.  International  Bimetallism. 

345.  Issue  of  Treasury  Notes. 

346.  Legal  Tender — Foreign  Coins. 

347.  Legal  Tender— Gold  Coin. 

348.  Legal  Tender — Standard  Silver  Dollars. 

349.  Legal  Tender — Subsidiary  Silver  Coins. 

350.  Legal  Tender — Minor  Coins. 

351.  Legal  Tender — United  States  Notes. 

352.  Legal  Tender — Demand  Treasury  Notes. 

376 


377 

353.  Legal  Tender — Interest-Bearing  Notes. 

354.  Legal  Tender — National  Bank   Notes — Federal  Re- 

serve Notes. 

355.  Legal  Tender — Gold  and  Silver  Certificates. 

356.  Legal  Tender— Gold  Certificates. 

357.  Legal  Tender— Act  March  14,  1900. 

358.  Regulations  Governing  the  Issue,  Exchange  and  Re- 

demption of  Money. 

§  329.  Gold  Dollar  As  Standard  Unit  of  Value.— That  the  dol- 
lar consisting  of  twenty-five  and  eight-tenths  grains  of  gold  nine- 
tenths  fine,  as  established  by  section  thirty-five  hundred  and  eleven 
of  the  Revised  Statutes  of  the  United  States,  shall  be  the  standard 
unit  of  value,  and  all  forms  of  money  issued  or  coined  by  the 
United  States  shall  be  maintained  at  a  parity  of  value  with  this 
standard,  and  it  shall  be  the  duty  of  the  Secretary  of  the  Treas- 
ury to  maintain  such  parity.  (Act  March  14,  1900,  Sec.  1;  31 
Stat.  U.  S.,  45.) 

§  330.  Maintenance  of  Gold  Reserve  of  One  Hundred  and  Fifty 
Million — Sale  of  Bonds  to  Replenish  Reserve.— 'That  United 
States  notes,  and  Treasury  notes  issued  under  the  Act  of  July 
fourteenth,  eighteen  hundred  and  ninety,  when  presented  to  the 
Treasury  for  redemption,  shall  be  redeemed  in  gold  coin  of  the 
standard  fixed  in  the  first  section  of  this  Act,  and  in  order  to 
secure  the  prompt  and  certain  redemption  of  such  notes  as  herein 
provided  it  shall  be  the  duty  of  the  Secretary  of  the  Treasury  to 
set  apart  in  the  Treasury  a  reserve  fund  of  one  hundred  and  fifty 
million  dollars  in  gold  coin  and  bullion,  which  fund  shall  be  used 
for  such  redemption  purposes  only,  and  whenever  and  as  often  as 
any  of  said  notes  shall  be  redeemed  from  said  fund  it  shall  be  the 
duty  of  the  Secretary  of  the  Treasury  to  use  said  notes  so  redeemed 
to  restore  and  maintain  such  reserve  fund  in  the  manner  follow- 
ing, to  wit:  First,  by  exchanging  the  notes  so  redeemed  for  any 
gold  coin  in  the  general  fund  of  the  Treasury ;  second,  by  accepting 
deposits  of  gold  coin  at  the  Treasury  or  at  any  subtreasury  in  ex- 
change for  the  United  States  notes  so  redeemed;  third,  by  procur- 


378 

ing  gold  coin  by  the  use  of  said  notes,  in  accordance  with  the  pro- 
visions of  section  thirty-seven  hundred  of  the  Eevised  Statutes  of 
the  United  States.  .  If  the  Secretary  of  the  Treasury  is  unable  to 
restore  and  maintain  the  gold  coin  in  the  reserve  fund  by  the  fore- 
going methods,  and  the  amount  of  such  gold  coin  and  bullion  in 
said  fund  shall  at  any  time  fall  below  one  hundred  million  dollars, 
then  it  shall  be  his  duty  to  restore  the  same  to  the  maximum  sum 
of  one  hundred  and  fifty  million  dollars  by  borrowing  money  on 
the  credit  of  the  United  States,  and  for  the  debt  thus  incurred  to 
issue  and  sell  coupon  or  registered  bonds  of  the  United  States,  in 
such  form  as  he  may  prescribe,  in  denominations  of  fifty  dollars  or 
any  multiple  thereof,  bearing  interest  at  the  rate  of  not  exceeding 
three  per  centum  per  annum,  payable  quarterly,  such  bonds  to  be 
payable  at  the  pleasure  of  the  United  States  after  one  year  from 
the  date  of  their  issue,  and  to  be  payable,  principal  and  interest, 
in  gold  coin  of  the  present  standard  value,  and  to  be  exempt  from 
the  payment  of  all  taxes  or  duties  of  the  United  States,  as  well 
as  from  taxation  in  any  form  by  or  under  State,  municipal,  or  local 
authority;  and  the  gold  coin  received  from  the  sale  of  said  bonds 
shall  first  be  covered  into  the  general  fund  of  the  Treasury  and 
then  exchanged,  in  the  manner  hereinbefore  provided,  for  an  equal 
amount  of  the  notes  redeemed  and  held  for  exchange,  and  the 
Secretary  of  the  Treasury  may,  in  his  discretion,  use  said  notes  in 
exchange  for  gold,  or  to  purchase  or  redeem  any  bonds  of  the 
United  States,  or  for  any  other  lawful  purpose  the  public  interests 
may  require,  except  that  they  shall  not  be  used  to  meet  deficiencies 
in  the  current  revenues.  That  United  States  notes  when  redeemed 
in  accordance  with  the  provisions  of  this  section  shall  be  reissued, 
but  shall  be  held  in  the  reserve  fund  until  exchanged  for  gold,  as 
herein  provided ;  and  the  gold  coin  and  bullion  in  the  reserve  fund, 
together  with  the  redeemed  notes  held  for  use  as  provided  in  this 
section,  shall  at  no  time  exceed  the  maximum  sum  of  one  hundred 
and  fifty  million  dollars.  (Act  March  14,  1900,  Sec.  2;  31  Stat. 
U.  S.,  45.) 

Section  7  of  the  Federal  Reserve  Act  provides  that  the  net  earnings 
derived  by  the  United  States  from  Federal  reserve  banks  shall,  in  the 
discretion  of  the  Secretary,  be  used  to  supplement  the  gold   reserve 


ot  y 

held  against  outstanding  United  States  notes,  or  shall  be  applied  to  the 
reduction  of  the  outstanding  bonded  indebtedness  of  the  United  States 
under  regulations  to  be  prescribed  by  the  Secretary  of  the  Treasury. 

§  331.  Establishment  of  Divisions  of  Issue  and  of  Redemption. 
— That  there  be  established  in  the  Treasury  Department,  as  a  part 
of  the  office  of  the  Treasurer  of  the  United  States,  divisions  to  be 
designated  and  known  as  the  division  of  issue  and  the  division  of 
redemption,  to  which  shall  be  assigned,  respectively,  under  such 
regulations  as  the  Secretary  of  the  Treasury  may  approve,  all 
records  and  accounts  relating  to  the  issue  and  redemption  of  United 
States  notes,  gold  certificates,  silver  certificates,  and  currency  cer- 
tificates. There  shall  be  transferred  from  the  accounts  of  the  gen- 
eral fund  of  the  Treasury  of  the  United  States,  and  taken  up  on 
the  books  of  said  divisions,  respectively,  accounts  relating  to  the 
reserve  fund  for  the  redemption  of  United  States  notes  and 
Treasury  notes,  the  gold  coin  held  against  outstanding  gold  cer- 
tificates, the  United  States  notes  held  against  outstanding  cur- 
rency certificates,  and  the  silver  dollars  held  against  outstanding 
silver  certificates,  and  each  of  the  funds  represented  by  these  ac- 
counts shall  be  used  for  the  redemption  of  the  notes  and  certificates 
for  which  they  are  respectively  pledged,  and  shall  be  used  for  no 
other  purpose,  the  same  being  held  as  trust  funds.  (Act  March 
14  1900,  Sec.  4;  31  Stat.  U.  S,  46.) 

§  332.  Cancellation  of  Treasury  Notes  and  Issue  of  Silver  Cer- 
tificates.— That  it  shall  be  the  duty  of  the  Secretary  of  the  Treas- 
ury, as  fast  as  standard  silver  dollars  are  coined  under  the  pro- 
visions of  the  Acts  of  July  fourteenth,  eighteen  hundred  and 
ninety,  and  June  thirteenth,  eighteen  hundred  and  ninety-eight, 
from  bullion  purchased  under  the  Act  of  July  fourteenth,  eighteen 
hundred  and  ninety,  to  retire  and  cancel  an  equal  amount  of 
Treasury  notes  whenever  received  into  the  Treasury,  either  by  ex- 
change in  accordance  with  the  provisions  of  this  Act  or  in  the  or- 
dinary course  of  business,  and  upon  the  cancellation  of  Treasury 
notes  silver  certificates  sbnll  be  issued  against  the  silver  dollars  so 
coined.    (Act  March  14,  1900,  Sec.  5;  31  Stat.  U.  S.,  47.) 


380 

§  333.  Issue  of  Gold  Certificates. — That  the  Secretary  of  the 
Treasury  is  hereby  authorized  and  directed  to  receive  deposits  of 
gold  coin  with  the  Treasurer,  or  any  assistant  treasurer  of  the 
United  States,  in  sums  of  not  less  than  twenty  dollars,  and  to 
issue  gold  certificates  therefor  in  denominations  of  not  less  than 
ten  dollars,  and  the  coin  so  deposited  shall  be  retained  in  the 
Treasury  and  held  for  the  payment  of  such  certificates  on  demand, 
and  used  for  no  other  purpose.  Such  certificates  shall  be  receivable 
for  customs,  taxes,  and  all  public  dues,  and  when  so  received  may 
be  reissued,  and  when  held  by  any  National  banking  association 
may  be  counted  as  a  part  of  its  lawful  reserve:  Provided,  That 
whenever  and  so  long  as  the  gold  coin  and  bullion  held  in  the 
reserve  fund  in  the  Treasury  for  the  redemption  of  United  States 
notes  and  Treasury  notes  shall  fall  and  remain  below  one  hundred 
million  dollars  the  authority  to  issue  certificates  as  herein  provided 
shall  be  suspended :  And  provided  further,  That  whenever  and  so 
long  as  the  aggregate  amount  of  United  States  notes  and  silver 
certificates  in  the  general  fund  of  the  Treasury  shall  exceed  sixty 
million  dollars  the  Secretary  of  the  Treasury  may,  in  his  discre- 
tion, suspend  the  issue  of  the  certificates  herein  provided  for :  And 
provided  further,  That  of  the  amount  of  such  outstanding  certifi- 
cates one-fourth  at  least  shall  be  in  denominations  of  fifty  dol- 
lars or  less:  And  provided  further,  That  the  Secretary  of  the 
Treasury  may,  in  his  discretion,  issue  such  certificates  in  denomina- 
tions of  ten  thousand  dollars,  payable  to  order :  And  provided  fur- 
ther, That  the  Secretary  of  the  Treasury  may,  in  his  discretion,  re- 
ceive, with  the  assistant  treasurer  in  New  York  and  the  assistant 
treasurer  in  San  Francisco,  deposits  of  foreign  gold  coin  at  their 
bullion  value  in  amounts  of  not  less  than  one  thousand  dollars  in 
value  and  issue  gold  certificates  therefor  of  the  description  herein 
authorized:  And  provided  further,  That  the  Secretary  of  the 
Treasury  may,  in  his  discretion,  receive,  with  the  Treasurer  or  any 
assistant  treasurer  of  the  United  States,  deposits  of  gold  bullion 
bearing  the  stamp  of  the  coinage  mints  of  the  United  States,  or  the 
assay  office  in  New  York,  certifying  their  weight,  fineness,  and 
value,  in  amounts  of  not  less  than  one  thousand  dollars  in  value, 
and  issue  gold  certificates  therefor  of  the  description  herein  author- 


381 

ized.  But  the  amount  of  gold  bullion  and  foreign  coin  so  held 
shall  not  at  any  time  exceed  two-thirds  of  the  total  amount  of  gold 
certificates  at  such  time  outstanding.  And  section  fifty-one  hun- 
dred and  ninety-three  of  the  Revised  Statutes  of  the  United  States 
is  hereby  repealed.  (Act  March  14,  1900,  Sec.  6;  31  Stat.  U.  S., 
47;  Act  March  4,  1907,  Sec.  1 ;  34  Stat.  U.  S.,  1289 ;  Act  March  2, 
1911 ;  36  Stat.  U.  S.,  965,  as  amended  by  Act  June  12,  1916 ;  39 
Stat.  L.,  225.) 

§  334.  Issue  of  Silver  Certificates.—  That  hereafter  silver  cer- 
tificates shall  be  issued  only  of  denominations  of  ten  dollars  and 
under,  except  that  not  exceeding  in  the  aggregate  ten  per  centum 
of  the  total  volume  of  said  certificates,  in  the  discretion  of  the 
Secretary  of  the  Treasury,  may  be  issued  in  denominations  of 
twenty  dollars,  fifty  dollars,  and  one  hundred  dollars;  and  silver 
certificates  of  higher  denomination  than  ten  dollars,  except  as 
herein  provided,  shall,  whenever  received  at  the  Treasury  or  re- 
deemed, be  retired  and  cancelled,  and  certificates  of  denominations 
of  ten  dollars  or  less  shall  be  substituted  therefor,  and  after  such 
substitution,  in  whole  or  in  part,  a  like  volume  of  United  States 
notes  of  less  denomination  than  ten  dollars  shall  from  time  to 
time  be  retired  and  cancelled,  and  notes  of  denominations  of  ten 
dollars  and  upward  shall  be  reissued  in  substitution  therefor,  with 
like  qualities  and  restrictions  as  those  retired  and  cancelled.  (Act 
March  14,  1900,  Sec.  7;  31  Stat.  U.  S,  47.) 

The  act  of  February  28,  1878,  authorized  the  issue  of  silver  cer- 
tificates in  sums  of  not  less  than  ten  dollars.  The  act  of  March  3, 
1887,  authorized  the  issue  of  one,  two,  and  five  dollar  certificates.  The 
section  supersedes  these  acts  as  to  all  new  issues. 

§  335.  Subsidiary  Silver  Coinage. — That  the  Secretary  of  the 
Treasury  is  hereby  authorized  to  use,  at  his  discretion,  any  silver 
bullion  in  the  Treasury  of  the  United  States  purchased  under  the 
Act  of  July  fourteenth,  eighteen  hundred  and  ninety,  for  coinage 
into  such  denominations  of  subsidiary  silver  coin  as  may  be  neces- 
sary to  meet  the  public  requirements  for  such  coin :  Provided, 
That  the  amount  of  subsidiary  silver  coin  outstanding  shall  not 


383 

at  any  time  exceed  in  the  aggregate  one  hundred  millions  of  dol- 
lars. Whenever  any  silver  bullion  purchased  under  the  Act  of 
July  fourteenth,  eighteen  hundred  and  ninety,  shall  be  used  in 
the  coinage  of  subsidiary  silver  coin,  an  amount  of  Treasury  notes 
issued  under  said  Act  equal  to  the  cost  of  the  bullion  contained 
in  such  coin  shall  be  cancelled  and  not  reissued.  (Act  March  14, 
1900,  Sec.  8;  31  Stat.  U.  S.,  47.) 

§  336.  Recoinage  of  Uncurrent  Subsidiary  Silver  Coin. — That 
the  Secretary  of  the  Treasury  is  hereby  authorized  and  directed 
to  cause  all  worn  and  uncurrent  subsidiary  silver  coin  of  the 
United  States  now  in  the  Treasury,  and  hereafter  received,  to 
be  recoined,  and  to  reimburse  the  Treasurer  of  the  United  States 
for  the  difference  between  the  nominal  or  face  value  of  such 
coin  and  the  amount  the  same  will  produce  in  new  coin  from  any 
moneys  in  the  Treasury  not  otherwise  appropriated.  (Act  March 
14,  1900,  Sec.  9;  31  Stat.  U.  S.,  48.) 

§  337.  Melting  of  Silver  Dollars— Sale  of  Bullion.— That  the 
Secretary  of  the  Treasury  is  hereby  authorized  from  time  to  time 
to  melt  or  break  up  and  to  sell  as  bullion  not  in  excess  of  three 
hundred  and  fifty  million  standard  silver  dollars  now  or  here- 
after held  in  the  Treasury  of  the  United  States.  Any  silver  cer- 
tificates which  may  be  outstanding  against  such  standard  silven 
dollars  so  melted  or  broken  up  shall  be  retired  at  the  rate  of  $1 
face  amount  of  such  certificates  for  each  standard  silver  dollar 
so  melted  or  broken  up.  Sales  of  such  bullion  shall  be  made  at 
such  prices  not  less  than  $1  per  ounce  of  silver  one  thousand  fine 
and  upon  such  terms  as  shall  be  established  from  time  to  time 
by  the  Secretary  of  the  Treasury.     (Act  April  23,  1918,  Sec.  1.) 

§  338.  Purchase  of  Silver  Ore.— That  upon  every  such  sale  of 
bullion  from  time  to  time  the  Secretary  of  the  Treasury  shall 
immediately  direct  the  Director  of  the  Mint  to  purchase  in  the 
United  States,  of  the  product  of  mines  situated  in  the  United 
States  and  of  reduction  works  so  located,  an  amount  of  silver  equal 
to  three  hundred  and  seventy-one  and  twenty-five  hundredths  grains 


383 

of  pure  silver  in  respect  of  every  standard  silver  dollar  so  melted 
or  broken  up  and  sold  as  bullion.  Such  purchases  shall  be  made 
in  accordance  with  the  then  existing  regulations  of  the  Mint  and 
at  the  fixed  price  of  $1  per  ounce  of  silver  one  thousand  fine, 
delivered  at  the  option  of  the  Director  of  the  Mint  at  New  York, 
Philadelphia,  Denver,  or  San  Francisco.  Such  silver  so  purchased 
may  be  resold  for  any  of  the  purposes  hereinafter  specified  in  sec- 
tion three  of  this  Act,  under  rules  and  regulations  to  be  established 
by  the  Secretary  of  the  Treasury,  and  any  excess  of  such  silver  so 
purchased  over  and  above  the  requirements  for  such  purposes,  shall 
be  coined  into  standard  silver  dollars  or  held  for  the  purpose  of 
such  coinage,  and  silver  certificates  shall  be  issued  to  the  amount  of 
such  coinage.  The  net  amount  of  silver  so  purchased,  after  making 
allowance  for  all  resales,  shall  not  exceed  at  any  one  time  the 
amount  needed  to  coin  an  aggregate  number  of  standard  silver 
dollars  equal  to  the  aggregate  number  of  standard  silver  dollars 
theretofore  melted  or  broken  up  and  sold  as  bullion  under  the  pro- 
visions of  this  Act,  but  such  purchases  of  silver  shall  continue  until 
the  net  amount  of  silver  so  purchased,  after  making  allowance  for 
all  resales,  shall  be  sufficient  to  coin  therefrom  an  aggregate  num- 
ber of  standard  silver  dollars  equal  to  the  aggregate  number  of 
standard  silver  dollars  theretofore  so  melted  or  broken  up  and 
sold  as  bullion.     (Act  April  23,  1918,  Sec.  2.) 

§  339.  Sales  of  Silver  Bullion — Purposes  of. — That  sales  of 
silver  bullion  under  authority  of  this  Act  may  be  made  for  the 
purpose  of  conserving  the  existing  stock  of  gold  in  the  United 
States,  of  facilitating  the  settlement  in  silver  of  trade  balances 
adverse  to  the  United  States,  of  providing  silver  for  subsidiary 
coinage  and  for  commercial  use,  and  of  assisting  foreign  govern- 
ments at  war  with  the  enemies  of  the  United  States.  The  alloca- 
tion of  any  silver  to  the  Director  of  the  Mint  for  subsidiary  coin- 
age shall,  for  the  purposes  of  this  Act,  bo  regarded  as  a  sale  or 
re  ale.     (Act  April  23,  1918,  Sec.  3.) 

§  340.  Reimbursement  for  Loss  in  Melting  Silver  Dollars. — 
That  the  Secretary  of  the  Treasury  is  authorized,  from  any  moneys 


384 

in  the  Treasury  not  otherwise  appropriated,  to  reimburse  the 
Treasurer  of  the  United  States  for  the  difference  between  the 
nominal  or  face  value  of  all  standard  silver  dollars  so  melted  or 
broken  up  and  the  value  of  the  silver  bullion,  at  $1  per  ounce  of 
silver  one  thousand  fine,  resulting  from  the  melting  or  breaking 
up  of  such  standard  silver  dollars.     (Act  April  23,  1918,  Sec.  4.) 

§  341.  Federal  Reserve  Bank  Notes — Issuance  of  to  Prevent 
Contraction  of  Currency. —  That  in  order  to  prevent  contraction  of 
the  currency,  the  Federal  reserve  banks  may  be  either  permitted 
or  required  by  the  Federal  Eeserve  Board,  at  the  request  of  the 
Secretary  of  the  Treasury,  to  issue  Federal  reserve  bank  notes,  in 
any  denominations  (including  denominations  of  $1  and  $2)  auth- 
orized by  the  Federal  Reserve  Board,  in  an  aggregate  amount  not 
exceeding  the  amount  of  standard  silver  dollars  melted  or  broken 
up  and  sold  as  bullion  under  authority  of  this  Act,  upon  deposit 
as  provided  by  law  with  the  Treasurer  of  the  United  States  as 
security  therefor,  of  United  States  certificates  of  indebtedness,  or 
of  United  States  one-year  gold  notes.  The  Secretary  of  the 
Treasury  may,  at  his  option,  extend  the  time  of  payment  of  any 
maturing  United  States  certificates  of  indebtedness  deposited  as 
security  for  such  Federal  reserve  bank  notes  for  any  period  not 
exceeding  one  year  at  any  one  extension  and  may,  at  his  option,  pay 
such  certificates  of  indebtedness  prior  to  maturity,  whether  or  not 
so  extended.  The  deposit  of  United  States  certificates  of  indebted- 
ness by  Federal  reserve  banks  as  security  for  Federal  reserve  bank 
notes  under  authority  of  this  Act  shall  be  deemed  to  constitute  an 
agreement  on  the  part  of  the  Federal  reserve  bank  making  such 
deposit  that  the  Secretary  of  the  Treasury  may  so  extend  the  time  of 
payment  of  such  certificates  of  indebtedness  beyond  the  original 
maturity  date  or  beyond  any  maturity  date  to  which  such  certificates 
of  indebtedness  may  have  been  extended,  and  that  the  Secretary 
of  the  Treasury  may  pay  such  certificates  in  advance  of  maturity, 
whether  or  not  so  extended.     (Act  April  23,  1918,  Sec.  5.) 

§  342.  Federal  Reserve  Bank  Notes — Retirement  of — Tax  on. — 

That  as  and  when  standard  silver  dollars  shall  be  coined  out  of 


385 

bullion  purchased  under  authority  of  this  Act,  the  Federal  reserve 
banks  shall  be  required  by  the  Federal  Reserve  Board  to  retire 
Federal  reserve  bank  notes  issued  under  authority  of  section  five  of 
this  Act,  if  then  outstanding,  in  an  amount  equal  to  the  amount  of 
standard  silver  dollars  so  coined,  and  the  Secretary  of  the  Treasury 
shall  pay  off  and  cancel  any  United  States  certificates  of  indebted- 
ness deposited  as  security  for  Federal  reserve  bank  notes  so  retired. 

That  the  tax  on  any  Federal  reserve  bank  notes  issued  under 
authority  of  this  Act,  secured  by  the  deposit  of  United  States  cer- 
tificates of  indebtedness  or  United  States  one-year  gold  notes, 
shall  be  so  adjusted  that  the  net  return  on  such  certificates  of 
indebtedness,  or  such  one-year  gold  notes,  calculated  on  the  face 
value  thereof,  shall  be  equal  to  the  net  return  on  United  States  two 
per  cent  bonds,  used  to  secure  Federal  reserve  bank  notes,  after 
deducting  the  amount  of  the  tax  upon  such  Federal  reserve  bank 
notes  so  secured. 

That  except  as  herein  provided,  Federal  reserve  bank  notes 
issued  under  authority  of  this  Act,  shall  be  subject  to  all  existing 
provisions  of  law  relating  to  Federal  reserve  bank  notes.  (Act 
April  23,  1918,  Sees.  <6,  7,  and  8.) 

§  343.  Exportation  of  Silver  Coin  or  Bullion  —  That  the  pro- 
visions of  Title  VII  of  an  Act  approved  June  fifteenth,  nineteen 
hundred  and  seventeen,  entitled  "An  Act  to  punish  acts  of  inter- 
ference with  the  foreign  relations,  the  neutrality,  and  the  foreign 
commerce  of  the  United  States,  to  punish  espionage,  and  better  to 
enforce  the  criminal  laws  of  the  United  States,  and  for  other  pur- 
poses," and  the  powers  conferred  upon  the  President  by  subsection 
(b)  of  section  five  of  an  Act  approved  October  sixth,  nineteen 
hundred  and  seventeen,  known  as  the  "Trading  with  the  Enemy 
Act,"  shall,  in  so  far  as  applicable  to  the  exportation  from  or  ship- 
ment from  or  taking  out  of  the  United  States  of  silver  coin  or 
silver  bullion,  continue  until  the  net  amount  of  silver  required  by 
section  two  of  this  Act  shall  have  been  purchased  as  therein  pro- 
vided.    (Act  April  23,  1918,  Sec.  9.) 

§  344.  International  Bimetallism.—  That  the  provisions  of  this 
Act  are  not  intended  to  preclude  the  accomplishment  of  Lnterna- 
25 


386 

tional  bimetallism  whenever  conditions  shall  make  it  expedient 
and  practicable  to  secure  the  same  by  concurrent  action  of  the 
leading  commercial  nations  of  the  world  and  at  a  ratio  which 
shall  insure  permanence  of  relative  value  between  gold  and  silver. 
(Act  March  14,  1900,  Sec.  14;  31  Stat.  TJ.  S.  49.) 

§  345.  Issue  of  Treasury  Notes.—  That  whenever  and  so  long  as 
the  outstanding  silver  certificates  of  the  denominations  of  one 
dollar,  two  dollars,  and  five  dollars,  issued  under  the  provisions 
of  section  seven  of  an  Act  entitled  "An  Act  to  define  and  fix 
the  standard  of  value,  to  maintain  the  parity  of  all  forms  of 
money  issued  or  coined  by  the  United  States,  to  refund  the  public 
debt,  and  for  other  purposes,"  approved  March  fourteenth,  nine- 
teen hundred,  shall  be,  in  the  opinion  of  the  Secretary  of  the 
Treasury,  insufficient  to  meet  the  public  demand  therefor,  he  is 
hereby  authorized  to  issue  United  States  notes  of  the  denomina- 
tions of  one  dollar,  two  dollars,  and  five  dollars,  and  upon  the 
issue  of  United  States  notes  of  such  denominations  an  equal 
amount  of  United  States  notes  of  higher  denominations  shall  be 
retired  and  cancelled:  Provided,  however,  That  the  aggregate 
amount  of  United  States  notes  at  any  time  outstanding  shall  re- 
main as  at  present  fixed  by  law:  And  provided  further,  That 
nothing  in  this  Act  shall  be  construed  as  affecting  the  right  of 
any  National  bank  to  issue  one-third  in  amount  of  its  circulating 
notes  of  the  denomination  of  five  dollars,  as  now  provided  by  law. 
(Act  March  4,  1907,  Sec.  2;  34  Stat.  U.  S.  1289.) 

§  346.  Legal  Tender — Foreign  Coins-  No  foreign  gold  or 
silver  coins  shall  be  a  legal  tender  in  payment  of  debts.  (Rev. 
Stat.  U.  S.  3584.) 

The  coinage  by  the  Government  of  Philippine  Islands  of  the  various 
silver  and  minor  coins  for  use  in  the  islands  is  authorized  and  the 
legal-tender  quality  of  such  coins  as  well  as  of  the  gold  coins  of  the 
United  States  in  the  islands  is  prescribed  by  the  Act  of  July  1,  1902,  c. 
1369,  sees.  76-83,  32  Sflat.  L.,  710,  and  the  Act  of  March  2,  1903,  c. 
980,  sec.  4,  32  Stat.  L.,  953. 


387 

§  347.  Legal  Tender — Gold  Coin.-  The  gold  coins  of  the 
United  States  shall  be  a  legal  tender  in  all  payments  at  their 
nominal  value  when  not  below  the  standard  weight  and  limit  of 
tolerance  provided  by  law  for  the  single  piece,  and  when  reduced 
in  weight  below  such  standard  and  tolerance,  shall  be  a  legal 
tender  at  valuation  in  proportion  to  their  actual  weight.  (Rev. 
Stat.  U.  S.  3585.) 

§  348.  Legal  Tender — Standard  Silver  Dollars.— That  there 
shall  be  coined  at  the  several  mints  of  the  United  States,  silver 
dollars  of  the  weight  of  412%  grains  Troy  of  standard  silver 

*  *  *•  which  coins  together  with  all  silver  dollars  hereto- 
fore coined  by  the  United  States,  of  like  weight  and  fineness,  shall 
be  a  legal  tender,  at  their  nominal  value,  for  all  debts  and  dues, 
public  and  private,  except  where  otherwise  expressly  stipulated  in 
the  contract.     (Act  Feb.  28,  1878,  Sec.  1;  20  Stat.  U.  S.  25.) 

§  349.  Legal  Tender — Subsidiary  Silver  Coins. —  That  the  pre- 
sent silver  coins  of  the  United  States  of  smaller  denominations 
than  one  dollar  shall  hereafter  be  a  legal  tender  in  all  sums  not 
exceeding  ten  dollars  in  full  payment  of  all  dues  public  and  pri- 
vate.    (Act  June  9,  1879,  Sec.  3;  21  Stat.  U.  S.  8.) 

§  350.  Legal  Tender — Minor  Coins.— The  minor  coins  of  the 
United  States  shall  be  a  legal  tender,  at  their  nominal  value,  for 
any  amount  not  exceeding  twenty-five  cents  in  any  one  payment. 
(Eev.  Stat.  U.  S.  3587.) 

§  351.  Legal  Tender — United  States  Notes—  United  States 
notes  shall  be  lawful  money,  and  a  legal  tender  in  payment  of  all 
debts,  public  and  private,  within  the  United  States,  except  for 
duties  on  imports  and  interest  on  the  public  debt.  (Rev.  Stat. 
U.  S.  3588.) 

§  352.  Legal  Tender — Demand  Treasury  Notes.—  Demand 
Treasury  notes  authorized  by  the  Act  of  July  17,  18G1,  chapter  5, 
and  the  Act  of  February  12,  1862,  chapter  20,  shall  be  lawful 


388 

money  and  legal  tender  in  like  manner  as  United  States  notes. 
(Eev.  Stat.  IT.  S.  3589.) 

§  353.  Legal  Tender — Interest-Bearing  Notes. — Treasury  notes 
issued  under  the  authority  of  the  Acts  of  March  3,  1863,  chapter 
73,  and  June  30,  186-A',  chapter  172,  shall  be  legal  tender  to  the 
same  extent  as  United  States  notes,  for  their  face  value,  excluding 
interest:  Provided,  That  Treasury  notes  issued  under  the  act  last 
named  shall  not  be  a  legal  tender  in  payment  or  redemption  of  any 
notes  issued  by  any  bank,  banking  association,  or  banker,  calculated 
and  intended  to  circulate  as  money.     (Eev.  Stat.  U.  S.  3590.) 

§  354.  Legal  Tender — National  Bank  Notes — Federal  Reserve 
Notes.—  See  §  81  for  reference  to  National  bank  notes  and  §  25G 
for  reference  to  Federal  Eeserve  Notes. 

§  355.  Legal  Tender— Gold  and  Silver  Certificates.— That  the 
Secretary  of  the  Treasury  is  authorized  and  directed  to  receive  de- 
posits of  gold  coin  with  the  Treasurer  or  assistant  treasurers  of  the 
United  States,  in  sums  of  not  less  than  twenty  dollars,  and  to 
issue  certificates  therefor  in  denominations  of  not  less  than  twenty 
dollars  each,  corresponding  with  the  denominations  of  United 
States  notes.  The  coin  deposited  for  or  representing  the  certifi- 
cates of  deposit  shall  be  retained  in  the  Treasury  for  the  payment 
of  the  same  on  demand.  Said  certificates  shall  be  receivable  for 
customs,  taxes,  and  all  public  dues,  and  when  so  received  may  be 
reissued ;  and  such  certificates,  as  also  silver  certificates,  when  held 
by  any  National  banking  association,  shall  be  counted  as  part  of 
its  lawful  reserve;  and  no  National  banking  association  shall  be  a 
member  of  any  clearing  house  in  which  such  certificates  shall 
not  be  receivable  in  the  settlement  of  clearing-house  balances: 
Provided,  That  the  Secretary  of  the  Treasury  shall  suspend  the 
issue  of  such. gold  certificates  whenever  the  amount  of  gold  coin 
and  gold  bullion  in  the  Treasury  reserved  for  the  redemption  of 
United  States  notes  falls  below  one  hundred  million  dollars;  and 
the  provisions  of  section  fifty-two  hundred  and  seven  of  the  Ee- 
vised  Statutes  shall  be  applicable  to  the  certificates  herein  author- 


389 

ized  and  directed  to  be  issued.     (Act  July  12,  1882,  Sec.  12;  22 
Stat.  U.  S.  165.) 

See  the  following  section  for  additional  and  more  recent  pro- 
visions relating  to  gold  certificates.     See  also  §  333. 

§  356.  legal  Tender — Gold  Certificates.- That  gold  certificates 
of  the  United  States  payable  to  bearer  on  demand  shall  be  and  are 
hereby  made  legal  tender  in  payment  of  all  debts  and  dues,  public 
and  private.  That  all  Acts  or  parts  of  Acts  which  are  inconsistent 
with  this  Act  are  hereby  repealed.     (Act  December  24,  1919.) 

§  357.  Legal  Tender— Act  March  14,  1900.—  That  nothing  con- 
tained in  this  Act  shall  be  construed  to  affect  the  legal-tender 
quality  as  now  provided  by  law  of  the  silver  dollar,  or  of  any  other 
money  coined  or  issued  by  the  United  States.  (Act  March  14,  1900, 
Sec.  3;  31  Stat.  U.  S.  46.) 

§  358.  Regulations  Governing  the  Issue,  Exchange  and  Redemp- 
tion of  Money. — 

The  following  regulations  govern  the  issue,  exchange,  and  redemp- 
tion of  the  paper  money  and  the  gold,  silver,  and  minor  coin  of  the 
United  States,  and  the  redemption  of  National  bank  notes,  Federal  re- 
serve notes,  and  Federal  reserve  bank  notes  by  the  Treasurer  of  the 
United  States. 

I. — Issue  of  United  States  Paper  Currency. 

1.  New  United  States  paper  currency  is  issued  upon  request  in  re- 
turn for  United  States  paper  currency  unfit  for  circulation,  Federal 
reserve  notes,  Federal  reserve  bank  notes,  National  bank  notes,  sub- 
sidiary silver  coin,  or  minor  coin,  received  for  redemption  or  exchange. 

2.  Gold  certificates  are  issued  by  the  Treasurer  or  any  Assistant 
Treasurer  upon  a  deposit  of  gold  coin. 

3.  Silver  certificates  are  issued  by  the  Treasurer  or  any  Assistant 
Treasurer  upon  a  deposit  of  standard  silver  dollars. 

II. — Issue  of  Gold  Coin. 

4.  Gold  coin  is  issued  by  the  Treasurer  or  any  Assistant  Treasurer 
for  gold  certificates,  United   States  notes,  or  Treasury  notea  of  1890, 


390 

and  will  be  sent  by  mail  (postage  and  insurance  deducted),  unless 
otherwise  requested,  in  which  case  the  charges  for  transportation  are 
to  be  paid  by  the  consignee  on  delivery  of  the  coin. 

III. — Issue  of  Standard  Silver  Dollars,  Subsidiary  Silver  Coin,  and 

Minor  Coin. 

6.  Standard  silver  dollars  are  Issued  by  the  Treasurer  or  any  Assist- 
ant Treasurer  in  redemption  of  silver  certificates  or  Treasury  notes  of 
1890,  and  will  be  sent  by  mail  (postage  and  insurance  deducted),  un- 
less otherwise  requested,  in  which  case  the  charges  for  transporta- 
tion are  to  be  paid  by  the  consignee  on  delivery  of  the  coin. 

6.  Subsidiary  silver  coin  (halves,  quarters,  and  dimes)  and  minor 
coin  (1-cent  bronze  and  5-cent  nickel)  are  issued  upon  a  deposit  of 
United  States  currency,  national  bank  notes,  Federal  reserve  notes 
or  Federal  reserve  bank  notes,  with  the  Treasurer  or  any  Assistant 
Treasurer  ot  National  bank  depositary,  and  the  coin  will  be  sent  from 
the  nearest  subtreasury  by  mail  (postage  and  insurance  deducted), 
unless  otherwise  requested,  in  which  case  the  charges  for  transporta- 
tion are  to  be  paid  by  the  consignee  on  delivery  of  the  coin. 

Subsidiary  silver  coin  and  minor  coin  are  also  issued  for  drafts 
on  New  York,  Baltimore,  Boston,  Chicago,  Cincinnati,  New  Orleans, 
Philadelphia,  St.  Louis,  or  San  Francisco,  payable  to  the  order  of  the 
Assistant  Treasurer  of  the  United  States  in  the  city  on  which  drawn, 
or  for  drafts  drawn  on  Washington,  payable  to  the  order  of  the  Treas- 
urer of  the  United  States.  The  drafts  should  be  forwarded  directly  to 
the  office  to  whose  order  they  are  payable,  with  advice  of  the  kind 
and  denominations  of  coin  desired. 

7.  Application  for  new  coin  must  be  made  to  the  Treasurer  of  the 
United  States.  When  such  coin  is  available  for  issue,  and  after  de- 
posit of  an  equivalent  amount  in  other  funds  has  been  made  as  directed 
by  the  Treasurer,  the  coin  will  be  sent  from  the  mints  by  mail  (postage 
and  insurance  deducted),  unless  otherwise  requested,  in  which  case 
the  charges  for  transportation  are  to  be  paid  by  the  consignee  on  de- 
livery of  the  coin. 

IV. — Redemption  of  Paper  Currency. 

8.  United  States  notes  and  gold  certificates  are  redeemable  in  gold 
coin;  Treasury  notes  of  1890  in  gold  coin  or  silver  dollars  and  silver 
certificates  in  silver  dollars  by  the  Treasurer  and  Assistant  Treasurers. 

National  bank  notes  and  Federal  reserve  bank  notes  are  redeemable 
in  lawful  money  of  the  United  States  by  the  Treasurer,  but  not  by 
the  Assistant  Treasurers. 


391 

Federal  reserve  notes  are  redeemable  in  gold  by  the  Treasurer,  but 
not  by  the  Assistant  Treasurers. 

United  States  notes,  Treasury  notes  of  1890,  fractional  currency  notes, 
Federal  reserve  notes,  Federal  reserve  bank  notes,  National  bank  notes, 
gold  certificates,  and  sliver  certificates,  unfit  for  circulation,  when  not 
mutilated  so  that  less  than  three-fifths  of  the  original  proportions  re- 
mains, will  be  redeemed  at  their  face  value  in  new  currency. 

9.  United  States  notes,  Treasury  notes  of  1890,  fractional  currency 
notes,  gold  certificates,  silver  certificates,  National  bank  notes,  Fed- 
eral reserve  notes,  and  Federal  reserve  bank  notes,  when  mutilated  so 
that  less  than  three-fifths,  but  clearly  more  than  two-fifths  of  the  orig- 
inal proportions  remains,  are  redeemable  by  the  Treasurer  only,  at 
one-half  the  face  value  of  the  whole  note  or  certificate.  Fragments 
not  clearly  more  than  two-fifths  are  not  redeemed,  unless  accompanied 
by  the  evidence  required  in  paragraph  10. 

10.  Fragments  less  than  three-fifths  are  redeemed  at  the  face  value 
of  the  whole  note  when  accompanied  by  an  affidavit  of  the  owner  or 
other  persohi  having  knowledge  of  the  facts  that  the  missing  portions 
have  been  totally  destroyed.  The  affidavit  must  state  the  cause  and 
manner  of  the  mutilation,  and  must  be  subscribed  and  sworn  to  before 
an  officer  qualified  to  administer  oaths,  who  must  affix  his  official  seal 
thereto,  and  the  character  of  the  affiant  must  be  certified  to  be  good 
by  such  officer  or  some  one  having  an  official  seal.  Signatures  by  mark 
(X)  must  be  witnessed  by  two  persons  who  can  write,  and  who  must 
give  their  places  of  residence.  The  Treasurer  will  exercise  such  dis- 
cretion under  this  regulation  as  may  seem  to  him  needful  to  protect 
the  United  States  from  fraud.  Fragments  not  redeemable  are  returned. 
Blank  forms  for  affidavits  are  not  furnished.  The  department  can  not 
make  reimbursement  for  currency  totally  destroyed. 

V. — Retubns  foe  Paf-eh  Currency. 

11.  For  remittances  received  for  redemption. — For  remittances  from 
a  place  where  there  is  no  subtreasury,  returns  will  be  made  in  new 
United  States  paper  currency  by  mail  (postage  and  insurance  de- 
ducted), unless  otherwise  requested,  in  which  case  the  charges  for 
transportation  are  to  be  paid  by  the  consignee;  or,  if  desired,  in  sub- 
sidiary silver  coin  or  in  minor  coin  by  mail  (postage  and  insurance 
deducted),  unless  otherwise  requested,  in  which  case  the  charges  for 
transportation  are  to  be  paid  by  the  consignee  on  delivery  of  the 
coin. 

For  remittances  from  a  place  where  there  is  a  subtreasury,  returns 
will  be  made  in  new  United  States  paper  currency  by  mail  (postage 
and   insurance  deducted),  unless  otherwise  requested,   in  which  case 


392 

the  charges  for  transportation  are  to  be  paid  by  the  consignee,  or 
subject  to  the  convenience  of  the  Treasury,  by  the  Treasurer's  checks. 
Exchange,  subject  to  the  convenience  of  the  Treasury,  will  be  fur- 
nished for  currency  or  coin  received  for  redemption  on  which  the 
transportation  charges  have  been  prepaid. 

VI. — Redemption  or  Exchange  of  Sieves  and  Minor  Coin. 

12.  Standard  silver  dollars  may  be  presented  for  exchange  into  silver 
certificates  only.  Subsidiary  silver  coin  (halves,  quarters,  and  dimes) 
and  minor  coin  (1-cent  bronze  and  5-cent  nickel),  assorted  by  denomina- 
tions, in  separate  packages,  may  be  presented  in  sums  or  multiples 
of  $20  to  the  Treasurer  or  any  Assistant  Treasurer  for  redemption  in 
lawful  money.  The  words  "sums  or  multiplies  of  $20"  apply  to  sub- 
sidiary silver  and  minor  coin  separately.  "When  coin  is  forwarded  the 
charges  must  be  prepaid. 

13.  Coins  should  be  shipped  loose  in  cloth  bags.  Shipments  put  up 
in  wrappers,  envelopes,  or  rolls  of  paper  will  not  be  received.  Not 
more  than  $1,000  in  silver  coin,  $300  in  5-cent  pieces,  or  $100  in  cents 
should  be  shipped  in  one  bag  or  package. 

14.  No  foreign  or  mutilated  silver  coin,  or  coin  to  which  paper  or 
any  other  substance  is  attached,  or  upon  which  any  name  or  adver- 
tisement is  stamped  or  impressed,  will  be  received.  Coin  is  mutilated 
when  punched,  clipped,  chipped,  or  otherwise  appreciably  reduced  in 
weight  by  any  means  except  natural  abrasion.  Silver  coin  so  mutilated 
or  reduced  will  be  stamped  by  the  receiving  officer  with  a  distinguish- 
ing mark  before  it  is  returned  to  the  depositor.  Silver  coin  not  mu- 
tilated, but  defaced  otherwise  than  as  above  described,  where  it  can 
be  clearly  and  readily  identified  as  to  denomination  and  genuineness, 
will  be  redeemed. 

15.  Minor  coin  that  is  so  defaced  as  not  to  be  readily  identified,  or 
that  is  punched  or  clipped,  will  not  be  redeemed.  Pieces  that  are 
stamped,  bent,  or  twisted  out  of  shape,  or  otherwise  imperfect  but 
showing  no  material  loss  of  metal,  will  be   redeemed. 

16.  When  gold,  silver,  or  minor  coin  is  shipped  for  credit  of  the 
5  per  cent,  redemption  fund  or  as  a  transfer  of  funds,  it  should  be 
stated  on  the  shipping  tag  attached  to  the  bag  as  well  as  in  the  letter 
of  advice. 

VII. — Transmission   of  Paper  Currency  to  the  Treasurer. 

17.  Paper  currency  for  redemption  must  be  assorted  by  kinds  and 
denominations,  and  each  100  notes  or  less  inclosed  in  a  paper  strap 
marked  with  the  amount.  Each  1,000  notes,  as  nearly  as  convenient, 
in  straps,  should  be  inclosed  in  a  paper  band  likewise  marked.     In 


393 

large  consignments,  two  such  parcels  laid  flat,  face  to  back,  with 
two  others  directly  upon  them,  never  more  than  4,000  notes  in  one 
package,  should  be  firmly  tied  with  two  cords  and  sealed  up  in  stout 
paper,  forming  a  compact  package  about  6  by  8  by  12  inches.  With 
each  package  should  be  inclosed  a  memorandum  giving  an  inventory 
of  the  contents,  the  sender's  name  and  address,  and  the  disposition 
to  be  made  of  the  proceeds. 

VIII. — Addbess  on  Packages   Sent  to  Washington. 

18.  All  packages  should  be  addressed  to  the  Treasurer  of  the  United 
States  only.  If  addressed  otherwise,  it  involves  delay  and  risk.  They 
should  be  double  wrapped,  the  outside  wrapper  bearing  the  owner's 
name  and  address  and  the  inside  package  being  marked  with  the 
amount  and  kind  of  currency. 

19.  United  States  notes,  Treasury  notes  of  1890,  gold  certificates, 
and  silver  certificates  may  be  sent  in  the  same  package  and  should 
be  marked  "Unfit  United  States  currency  for  redemption."  National 
bank  notes,  Federal  reserve  notes,  and  Federal  reserve  bank  notes 
may  be  sent  in  the  same  package  marked  "National  and  Federal 
reserve  currency  for  redemption,"  but  each  kind  should  be  under 
separate  straps.  The  failure  to  indicate  on  packages  the  kind  of 
notes  inclosed  causes  delay  in  making  returns.  A  letter  of  advice 
should  be  mailed  for  each  day's  consignment  of  United  States  cur- 
rency, and  a  separate  one  for  National  and  Federal  reserve  currency. 
No  package  should  contain  more  than  4,000  notes. 

IX. — Shipment  of  Unfit  Notes  to  Washington. 

20.  Charges  are  paid  by  the  Government  on  unfit  National  bank 
notes,  Federal  reserve  notes,  and  Federal  reserve  bank  notes  when 
sent  to  the  department  at  Washington,  charges  collect.  No  charges 
are  paid  by  the  Government  on  any  other  kind  of  currency  sent  for 
redemption. 

21.  All  charges  must  be  prepaid  by  the  sender  on  shipments  for 
exchange  or  redemption  of  gold  coin,  standard  silver  dollars,  sub- 
sidiary silver  coin,  and  minor   coin. 

22.  National  bank  depositaries  must  pay  all  charges  incurred  by 
them  on  account  of  transfer  of  public  funds. 

23.  In  order  to  save  time  and  expedite  shipments  in  return  for 
currency  redeemed  when  the  amounts  are  large,  orders  should  be  for 
original  packages  of  4,000  notes  each  of  the  same  denomination,  that 
is,  ones  in  packages  of  $4,000;  twos,  $8,000;  fives,  $20,000;  tens 
$40,000;   and  so  on. 

24.  The  Government  has  no  contract  for  carrying  money  or  other 


394 

securities,  and  shipments  will  be  made  as  herein  provided  unless 
specific  instructions  are  received  designating  the  particular  manner 
in    which   the    same    is    desired. 

X. — Shipments  of  Moneys   from  Washington. 

25.  For  shipments  of  paper  currency  from  Washington  and  from 
and  between  subtreasuries,  arrangements  have  been  made  with  the 
Postoffice  Department  for  ones,  twos,  and  fives  to  move  at  parcel-post 
rates  with  the  usual  parcel-post  weight  limits.  On  each  package  of 
ones,  or  twos,  there  is  a  ten-cent  registration  fee,  and  on  fives  the 
registration  fee  is  twenty-five  cents.  These  packages  are  treated  and 
handled  in  the  same  manner  as  first-class  registered  mail.  Tens, 
twenties,  and  above,  move  at  first-class  rates  with  ten-cent  registra- 
tion  fee.     Shipments  are  insured  for  full  value. 

26.  The  law  provides  for  free  registration  of  United  States  currency 
sent  to  the  Treasurer  of  the  United  States  for  redemption.  There 
will,  therefore,  be  no  registration  fee  in  that  case,  but  before  ship- 
ment the  local  postmaster  should  be  consulted  as  to  the  requirements 
under  section  914  of  the  Postal  Laws  and  Regulations.  National 
bank  notes,  Federal  reserve  notes,  and  Federal  reserve  bank  notes, 
require    the    registration    fee. 

27.  On  all  shipments  of  money  by  mail  from  banks  or  others  to 
the  Treasurer  of  the  United  States,  postage  must  be  prepaid  at  first- 
class  rates.     The  limit  of  weight  is  four  pounds  for  each  package. 

28.  As  to  insurance  for  full  value  on  currency  in  transit  by  regis- 
tered mail,  details  pertaining  to  the  Government's  contract  for  same, 
and  instructions  to  banks  whereby  they  may  avail  themselves  of  the 
privileges  and  benefits  of  this  new  method  of  transportation  of  cur- 
rency, together  with  the  rate  for  insurance  between  their  locality  and 
the  Treasury  in  Washington,  will  be  furnished  upon  inquiry  addressed 
to  the  Secretary  of  the  Treasury,  Division  of  Public  Moneys  (Mail 
insurance). 

XI. — General  Information. 

29.  Paper  currency  presented  for  redemption,  or  for  credit  of  the 
Treasurer  at  the  offices  of  the  Assistant  Treasurers,  must  be  assorted 
by  kinds  and  denominations  and  inclosed  in  paper  straps.  The  straps 
must  not  contain  more  than  100  notes  each,  and  the  amount  of  the 
contents  must  be  plainly  marked  thereon. 

30.  The  Act  of  June  30,  1876  (19  Stats.  U.  S.,  64),  requires  that  all 
United  States  officers  charged  with  the  receipt  or  disbursement  of  pub- 
lic moneys,  and  all  officers  of  National  banks,  shall  stamp  or  write  in 
plain  letters  the  word  "counterfeit,"  "altered,"  or  "worthless"  upon  all 
fraudulent  notes  issued  in  the  form  of  and  intended  to  circulate  as 


395 

money  which  shall  be  presented  at  their  places  of  business;  and  if 
such  officers  shall  wrongfully  stamp  any  genuine  note  of  the  United 
States  or  of  the  National  banks,  they  shall,  upon  presentation,  redeem 
such  notes  at  their  face  value. 

31.  Counterfeit  notes  found  in  remittances  from  banks  are  canceled 
and  returned  for  the  purpose  of  enabling  the  owner  to  make  reclama- 
tion, and  after  such  use  they  must  be  returned  to  the  Treasurer  of 
the  United  States  for  transfer  to  the  Secret  Service  Division  of  the 
Treasury    Department. 

32.  Counterfeit  notes  found  in  remittances  from  individuals  are 
canceled  and  sent  to  the  Secret  Service  Division.  The  sender  is  ad- 
vised of  the  fact  and  informed  that,  if  he  will  communicate  with 
the  chief  of  that  division,  arrangements  may  be  made  to  have  such 
notes  submitted   for   reclamation. 

33.  Counterfeit  coins  found  in  remittances  to  the  Treasurer  are  can- 
celed and  sent  to  the  Secret  Service  Division,  a  receipt  for  the  same 
being  returned  to  the  sender,  who  may  communicate  with  the  chief 
of  that  division  if  he  desires  to  have  such  coin  submitted  for  rec- 
lamation. 

34.  Counterfeit  coin  received  at  the  subtreasuries  is  retained,  to  be 
called  for  by  agents  of  the  Secret  Service  at  certain  stated  periods. 
A  receipt  is  issued  to  the  sender  or  depositor,  when  desired,  to  enable 
him   to  make   reclamation   for   coin   so   retained. 

35.  In  case  of  the  loss  or  destruction  of  a  Treasury  warrant  or  one 
of  the  Treasurer's  checks,  payment  of  the  original  warrant  or  check 
is  stopped  upon  notification  of  loss,  and  a  form  of  bond  of  idemnity 
is  furnished  for  the  issue  of  a  duplicate  upon  application  therefor. 


CHAPTEE  V. 


REGULATIONS 


OF    TREASURY    DEPARTMENT 
TO  UNITED  STATES  BONDS 


RELATING 


Section  359.  Kegulations  of  Treasury  Department  Regarding  U.  S. 
Bonds. 

§  359.  Regulations  of  Treasury  Department  Regarding  United 
States  Bonds. — 

Bonds  of  the  United  States. — The  original  issues  of  bonds  of  the 
United  States  under  the  several  authorizing  acts  of  Congress  are  di- 
vided into  coupon  and  registered  bonds.  Of  these  issues  the  following 
are  the  bonds  outstanding  and  bearing  interest,  May  1,  1920: 


Title  of  loan  and  date  of  author- 

Rateof 

■When    redeemable    or 

izing  act. 

Denominations. 

Int. 

payable 

Four  per  cent.  Loan  of  1925: 

Per  Ct. 

July     14,     1870,     and    Jan.    14, 

$50;  $100;  $500;  $1000.. 

4 

Redeemable  at  pleasure 

$50;    $100;    $500;    $1000; 
$5000;    $10,000 

of    the    United    States 

after  Feb.   1.   1925. 

Consols  of  1930: 

Mar.  14,  1900 — 'Coupon 

$50;   $100;   $500;   $1000.  . 

2 

Payable       at       pleasure 

Registered    .... 

$50;    $100;    $500;    $1000; 

of    the    United   States 

$5000;  $10,000;  $50,000 

after    30    years    from 

Panama  Canal  Loan,   1916-1936: 

Apr.    1,    1900. 

June    28,     1902,     and    Dec.     21, 

1905 — Coupon    

$20;    $100;    $1000 

2 

Redeemable  at  pleasure 

$20;  $100;  $1000;  $10,000 

of    the    United    States 

after    10    years    from 

Aug.  1,  1906,  and  pay- 

able    30     years     from 

Panama  Canal  Loan,   1918-1938: 

that  date. 

June    28,     1902,     and    Dec.     21, 

1905 — Coupon    

$20;    $100;    $1000 

$20;  $100;  $1000;  $10,000 

2 

Redeemable  at  pleasure 

of   the    United    States 

after    ten    years    from 

Nov.  1,  1908,  and  pay- 

able    30     years     from 

that    date. 

Panama  Canal  Loan,  1961: 

Aug.   5,  1909.  Feb.  4,   1910,   and 

Mar.  2,  1911 — Coupon 

$100;   $500;   $1000 

3 

Payable    50    years    from 

Registered.  .  . . 

$100;          $500;          $1000; 
$10,000 

June   1,    1911. 

Postal  Savings  Bonds: 

June  25,  1910 — Coupon 

2% 

Redeemable  at   pleasure 

Registered 

$20;    $100;    $500 

of    the    United    States 

New    series   issued   July   1    and 

after      1      year     from 

Jan.    1    of    each    year;    first 

date     of     issue,      and 

series  Issued  July   1,    1911. 

payable  20  years  from 

that   date. 

396 


397 

Interest  on  the  Consols  of  1930  is  payable  on  the  first  days  of  Jan- 
uary, April,  July  and  October;  on  the  Panama  Canal  Loan,  1961,  on 
the  first  days  of  March,  June,  September  and  December;  on  the  Postal 
Savings  Bonds  on  the  first  days  of  January  and  July;  on  the  other 
loans  listed  above  interest  is  payable  on  the  first  days  of  February, 
May,  August  and  November. 

Titles  of  Liberty  Bonds  and  Victory  Notes,  Denominations,  Interest 

Payment  Dates,  and  Periods  During  Which  Transfer 

Books  of  Registered  Bonds  and  Notes  Are  Closed. 

First  Liberty  Loan. 

First  Liberty  Loan  3%  per  cent,  bonds  of  1932-1947  (First  3y2's). 
Coupon  bonds:   $5o,  $loo,  $5oo,  $l,ooo. 

Registered    bonds:     $loo,    $5oo,    $l,ooo,    $5,ooo,    $lo,ooo,    $5o,ooo, 
$loo,ooo. 
Interest  payable  semiannually  on  June  15  and  December  15. 
Transfer  books  closed  from  close  of  business  May  15  to  opening 
of  business  June  16,  and  from  close  of  business  November  15 
to  opening  of  business  December  16. 
First    Liberty    Loan    Converted    4    per    cent,    bonds    of    1932-1947 

(First  4's). 
First    Liberty   Loan    Converted    4%    per    cent,    bonds    of    1932-1947 

(First  4%'s). 
First  Liberty  Loan  Second  Converted  4%  per  cent,  bonds  of  1932-1947 
(First  Second  4y4's). 

Coupon  bonds:    $5o,  $loo,  $5oo,  $l,ooo,  $5,ooo,  $lo,ooo. 
Registered  bonds:   $5o,  $loo,  $5oo,  ?l,ooo,  $5,ooo,  $lo,ooo,  $5o,ooo, 
$loo,ooo. 
Interest  payable  semiannually  on  June  15  and  December  15. 
Transfer  books  closed  from  close  of  business  May  15  to  opening 
of  business  June  16,  and  from  close  of  business  November  15 
to  opening  of  business  December  16. 

Second  Liberty  Loan. 

Second  Liberty  Loan  4  per  cent,  bonds  of  1927-1942   (Second  4's). 
Second   Liberty   Loan   Converted   4%    per  cent,   bonds   of   1927-1942 
(Second  4%'s). 
Coupon  bonds:    $5o,  $loo,  $5oo,  $l,ooo,  $5,ooo,  $lo,ooo. 
Registered  bonds:   $5o,  $loo,  ?5oo,  $l,ooo,  $5,ooo,  $lo,ooo,  $5o,ooo, 
$loo,ooo. 
Interest  payable  semiannually  on  May  15  and  November  15. 
Transfer  books  closed  from  close  of  business  April  15  to  open- 
ing of  business  May  16,  and  from  close  of  business  October  15 
to  opening  of  business  November  16. 


398 

Third  Liberty  Loan. 
Third  Liberty  Loan  4*4  per  cent,  bonds  of  1928   (Third  41/4's). 
Coupon  bonds:    $5o,  ?loo,  $5oo,  $l,ooo,  $5,ooo,  $lo,ooo. 
Registered  bonds:   $5o,  $loo,  $5oo,  ?l,ooo,  $5,ooo,  $lo,ooo,  $5o,ooo, 
$loo,ooo. 
Interest  payable  September  15,  1918,  and  thereafter  semiannually 

on  March  15  and  September  15. 
Transfer  books  closed  from  close  of  business  February  15  to 
opening  of  business  March  16,   and   from   close   of  business 
August  15  to  opening  of  business  September  16. 

Fourth  Liberty  Loan. 

Fourth    Liberty   Loan    4*4    per    cent,    bonds    of   1933-1938    (Fourth 
4%'s). 
Coupon  bonds:    $5o,  $loo,  $5oo,  $l,ooo,  $5,ooo,  $lo,ooo. 
Registered  bonds:    $5o,  $loo,  $5oo,  $l,ooo,  $5,ooo,  $lo,ooo,  $5o,ooo, 
$loo,ooo. 
Interest   payable   April    15,   1919,    and    thereafter   semiannually 

on  April  15  and  October  15. 
Transfer  books  closed  from  close  of  business  March  15  to  open- 
ing of  business  April  16,  and  from  close  of  business  September 
15  to  opening  of  business  October  16. 

Victory  Liberty  Loan. 
Victory  Liberty  Loan  4%   per   cent,  convertible  notes  of  1922-1923 

(Victory  4%'s). 
Victory  Liberty  Loan   Z%   per  cent,  convertible  notes  of  1922-1923 
(Victory  3%'s). 
Coupon  notes:   $5o,  ?loo,  $5oo,  $l,ooo,  $5,ooo,  $lo,ooo. 
Registered  notes:   $5o,  ?loo,  $5oo,  $l,ooo,  $5,ooo,  $lo,ooo,  ?5o,ooo, 
?loo,ooo. 
Interest  payable  December  15,  1919,  and  thereafter  semiannually 
on  June  15  and  December  15,  and  on  May  20,  1923.     Regis- 
tered notes  have  coupons  attached  thereto  for  interest  pay- 
able December  15,  1919. 
Transfer  books  closed  from  close  of  business  May  15  to  open- 
ing of  business  June  16,  and  from  close  of  business  November 
15  to  opening  of  business  December  16,  in  each  of  the  years 
1920,  1921,  and  1922;  transfer  books  will  also  be  closed  from 
close  of  business  April  20,  1923,  In  preparation  for  interest 
payment  May  20,  1923. 

Bonds  or  the  District  of  Columbia  and  of  the  Insular  Possessions 
of  the  United  States. — The  Treasury  Department  acts  as  registering 


399 

and  transfer  agent  for  certain  issues  of  bonds  of  the  District  of  Co- 
lumbia and  of  the  Governments  of  Porto  Rico  and  the  Philippine  Is- 
lands. The  regulations  in  regard  to  transactions  in  United  States 
bonds  are  applicable  to  similar  transactions  in  District  of  Columbia 
or  insular  bonds  registered  by  the  Treasury  Department. 

RULES  AND  REGULATIONS  CONCERNING  TRANSACTIONS  IN  LIBERTY  BONDS 

and  Victory  Notes. — These  Rules  and  Regulations,  with  the  excep- 
tions noted,  govern  also  transactions  in  United  States  bonds  issued 
prior  to  April  24,  1917. 

General  Provisions. — Exchanges  and  transfers  of  Liberty  bonds  and 
Victory  notes  may  be  made  only  as  between  bonds  and  notes  of  the 
same  issue  and  series.  Bonds  or  notes  presented  for  exchange  or 
transfer  must  be  delivered  to  the  Secretary  of  the  Treasury,  Division 
of  Loans  and  Currency,  Washington,  or  to  a  Federal  Reserve  Bank, 
at  the  risk  and  expense  of  the  respective  owners,  with  all  transporta- 
tion charges  prepaid.  No  charge  for  interchange  or  transfer  is  im- 
posed by  the  United  States.  Deliveries  of  coupon  bonds  or  notes 
issued  upon  exchange,  unless  made  in  person  to  the  owner  or  his 
duly  authorized  representative,  will  be  made  at  the  expense  and  risk 
of  the  owner.  Deliveries  of  registered  bonds  or  notes  issued  upon 
exchange  or  transfer,  unless  made  in  person  to  the  registered  owner 
or  his  duly  authorized  representative,  will  be  made  by  registered 
mail  without  expense  to,  but  at  the  risk  of,  the  registered  owner. 
Full  information  as  to  transportation  charges  and  risks  upon  bonds 
and  notes  presented  for  exchange  or  transfer,  or  issued  upon  exchange 
or  transfer,  and  as  to  special  arrangements  for  the  shipment  of  coupon 
bonds  and  notes  by  registered  mail  insured  when  transactions  are 
submitted  through  incorporated  banks  and  trust  companies  to  the 
appropriate  Federal  Reserve  Bank,  will  be  found  in  the  latter  part  of 
this  chapter  under  the  caption  "Transportation  Charges  and  Risks 
Upon  Bonds  and  Notes." 

Exchanges  of  coupon  bonds  or  notes  of  different  denominations  may 
be  effected  immediately  at  any  Federal  Reserve  Bank,  or  at  the  Treas- 
ury Department,  Washington,  at  any  time.  Transactions  involving 
exchanges  of  registered  bonds  or  notes  of  different  denominations, 
exchanges  of  coupon  and  registered  bonds  or  notes,  or  transfers  of 
registered  bonds  or  notes,  and  other  transactions  involving  the  issue, 
cancellation,  or  transfer  of  registered  bonds  or  notes,  may  be  pre- 
sented to  a  Federal  Reserve  Bank,  as  well  as  to  the  Treasury  Depart- 
ment, Washington,  but  can  be  effected  only  at  the  Treasury  Depart- 


400 

ment,  and  when  presented  to  a  Federal  Reserve  Bank  will  be  referred 
to  the  Department.  In  order  to  prepare  for  the  payment  of  interest, 
the  transfer  books  of  registered  bonds  and  notes  close  at  the  Treasury- 
Department,  Washington,  one  month  in  advance  of  each  date  for  the 
payment  of  registered  interest  and  reopen  on  the  day  following  such 
interest  payment  date.*  No  exchange  as  between  coupons  and  regis- 
tered bonds  or  notes,  nor  transfers  of  registered  bonds  or  notes,  may 
be  effected  for  a  particular  loan  while  the  transfer  books  of  that  loan 
are  closed,  and  bonds  or  notes  presented  for  such  exchange  or  transfer 
must  actually  have  been  received  at  the  Treasury  Department  in 
Washington  before  the  transfer  books  close.t  If  the  bonds  or  notes 
presented  for  such  exchange  or  transfer  are  received  at  the  Treasury 
Department  after  the  transfer  books  close,  the  transaction  will  be 
effected  only  upon  the  reopening  of  the  books.  Interest  on  registered 
bonds  and  notes,  unless  covered  by  coupons  appertaining  thereto, 
will  be  paid  on  each  interest  payment  date  to  the  registered  holders 
of  record  on  the  date  when  the  transfer  books  closed  in  anticipation 
of  such  interest  payment  date. 

The  Treasury  Department  and  the  Federal  Reserve  Banks  handle 
each  class  of  transaction  and  each  issue  and  series  of  bonds  and  notes 
separately.  The  transactions  can  not  be  intermingled,  and  should 
be  submitted  separately  and  so  far  as  possible  in  the  forms  hereinafter 
set  forth.  Transactions  will  be  expedited  if  submitted  to  Federal  Re- 
serve Banks,  fiscal  agents  of  the  United  States.  Persons  submitting 
bonds  and  notes  for  interchange  or  transfer  are  earnestly  requested 
to  observe  the  instructions  and  suggestions  contained  in  this  circular, 
and  to  use  the  respective  forms  hereto  attached. 

In  case  any  date  for  the  closing  of  the  transfer  books  falls  on  a 
Sunday  or  legal  holiday,  the  bo'oks  will  be  closed  on  the  day  pre- 
ceding such  date,  and  in  case  any  date  for  the  opening  of  the  transfer 
books  falls  on  a  Sunday  or  legal  holiday,  the  books  will  reopen  on 
the  day  following  such  date. 

Registered  bonds  or  notes  which  have  coupons  attached  thereto  for 
the  interest  payable  on  any  interest  payment  date  will  be  treated,  in 
respect  of  such  coupons,  like  coupon  bonds  or  notes;  that  is  to  say, 
the  interest  payable  on  such  interest  payment  date  will  be  paid  upon 

*This  applies  to  transfer  books  of  the  2  per  cent.  Consols  of  1930, 
but  books  on  all  other  "Old  loans"  close  15  days  previous  to  payment 
of  interest. 

tTransfers  to  the  Treasurer  of  the  United  States  in  trust  for  a 
National  bank  to  secure  its  circulation  is  permitted,  however. 


401 

presentation  and  surrender  of  such  coupons  and  not  by  check  to  the 
holders  of  record,  the  transfer  books  will  not  close  in  anticipation 
of  such  interest  payment  date,  and  such  coupons  when  unmatured  must 
be  attached  to  the  registered  bonds  or  notes  presented  for  exchange 
or  transfer.  Such  coupons  are  payable  to  bearer  and  are  not  pro- 
tected, in  the  course  of  transportation  or  otherwise,  by  the  regis- 
tration of  the  bond  or  note  to  which  they  appertain.  Insurance  ar- 
rangements may  be  effected  in  respect  of  such  coupons  as  for  coupon 
bonds  and  notes. 

Interchange  of  Bonds  and  Notes  of  Different  Denominations — Ex- 
changes of  Coupon  Bonds  or  Notes  for  Coupon  Bonds  or  Notes  of  Other 
Denominations.— Coupon  bonds  or  notes  may  be  presented  at  any  time 
for  exchange  for  an  equal  face  amount  of  coupon  bonds  or  notes  in 
any  other  authorized  denomination  of  the  same  issue  and  series. 
Coupon  bonds  or  notes  so'  presented  must  have  all  matured  coupons 
detached  and  all  unmatured  coupons  attached,  and  the  coupon  bonds 
or  notes  delivered  on  exchange  will  have  corresponding  matured 
coupons  detached  and  unmatured  coupons  attached.  Specific  instruc- 
tions fo'r  the  issue  and  delivery  of  the  new  coupon  bonds  or  notes 
must  accompany  the  bonds  or  notes  presented  for  exchange.  (Use 
Form  L.  &  C.  227,  copies  of  which,  or  of  a  substantially  similar  form, 
may  be  obtained  from  any  Federal  Reserve  Bank  or  from  the  Treasury 
Department.) 

Same — Exchanges  of  Registered  Bonds  or  Notes  for  Registered 
Bonds  or  Notes  of  Other  Denominations. — Registered  bonds  or  notes 
may  be  presented  at  any  time  for  exchange  fo'r  an  equal  face  amount 
of  registered  bonds  or  notes  inscribed  in  the  same  name  in  any  other 
authorized  denomination  of  the  same  issue  and  series.  Inasmuch 
as  such  exchanges  involve  no  change  of  ownership,  no  assignment  of 
registered  bonds  or  notes  so  presented  is  necessary,  and  such  ex- 
changes may  be  made  even  during  the  periods  when  the  transfer  books 
are  closed.  Specific  instructions  for  the  issue  and  delivery  of  the 
new  registered  bonds  or  notes  must  accompany  the  bonds  or  notes 
presented  for  exchange.  (Use  Form  L.  &  C.  227,  copies  of  which,  or 
of  a  substantially  similar  form,  may  be  obtained  from  any  Federal 
Reserve  Eank  or  from  the  Treasury  Department.) 

Interchange  of  Coupon  and  Registered  Bonds  and  Notes — Ex- 
changes of  Coupon  Bonds  or  Notes  for  Registeued  Bonds  or  Notes. — 
Coupon  bonds  or  notes  may  be  presented  for  exchange  for  an  equal 
face  amount  of  registered  bonds  or  notes  in  any  authorized  denomi- 
nation of  the  same  issue  and  series.  Such  exchanges  may  not  be 
20 


402 

effected  during  any  period  when  the  transfer  books  o'f  the  loan  in 
question  are  closed,  but  the  coupon  bonds  or  notes  may  nevertheless 
be  presented  for  exchange  during  any  such  period.  Matured  interest 
coupons  must  be  detached  from,  and  all  unmatured  coupons  must  be 
attached  to,  the  bonds  or  notes  presented  for  exchange;  provided, 
however,  that  if  presented  during  a  period  when  the  transfer  books 
are  closed,  the  coupon  maturing  at  the  end  of  such  period  should  be 
detached.  Registered  bonds  or  notes  issued  upo'n  exchange  requested 
while  the  transfer  books  are  open  will  bear  interest  from  the  last 
preceding  interest  payment  date.  Registered  bonds  or  notes  re- 
quested while  the  transfer  books  are  closed  but  issued  upon  the  open- 
ing of  the  transfer  books  following  the  interest  payment  date  will 
bear  interest  from  such  date.  Full  instructions  for  the  issue  and 
delivery  of  the  registered  bonds  or  notes  to  be  issued  upon  exchange 
should  accompany  the  coupon  bonds  or  notes  presented.  (Use  Form 
L.  &  C.  142,  copies  of  which,  or  of  a  substantially  similar  form,  may 
be  obtained  frdm  any  Federal  Reserve  Bank  or  from  the  Treasury 
Department.) 

Same — Exchanges  of  Registered  Bonds  or  Notes  for  Coupon  Bonds 
or  Notes.* — Registered  bonds  or  notes  may  be  presented  for  exchange 
for  an  equal  face  amount  of  coupon  bonds  or  notes  in  any  authorized 
denomination  of  the  same  issue  and  series.  Registered  bonds  or 
notes  so  presented  for  exchange  should  be  assigned  to  "The  Secretary 
of  the  Treasury  for  exchange  for  coupon  bonds/notes,"  and  such  as- 
signments must  be  witnessed  and  acknowledged  and  will  be  governed 
otherwise  by  the  same  regulations  as  provided  in  the  case  of  trans- 
fers. Assignments  must  not  be  made  to  "The  Secretary  of  the  Treas- 
ury" or  to  "The  Secretary  of  the  Treasury  for  exchange."  Specific 
instructions  for  the  issue  and  delivery  of  the  coupon  bonds  or  notes 
to  be  issued  upon  exchange  must  accompany  the  registered  bonds 
or  notes  presented.  (Use  Form  L.  &  C.  143,  copies  of  which,  of  of  a 
substantially  similar  form,  may  be  obtained  from  any  Federal  Reserve 
Bank  or  from  the  Treasury  Department.)  Such  exchanges  may  not 
be  made  during  any  period  when  the  transfer  books  of  the  loan  in  ques- 
tion are  closed.  Coupon  bonds  or  notes  delivered  upon  such  exchange 
will  have  all  matured  coupons  detached,  and  if  registered  bonds  or 
notes  are  presented  for  exchange  during  a  period  when  the  transfer 
books  are  closed  the  exchange  will  be  made  only  after  the  transfer 
books  reopen  following  the  interest  payment  date,  and  interest  on 
the  registered  bonds  or  notes  will  be  paid  to  the  holders  of  record 

♦Registered  bonds  of  issues  authorized  prior  to  April  24,  1917, 
can  not  be  exchanged  for  coupon  bonds. 


403 

at  the  time  the  transfer  books  closed  next  preceding  such  interest 
payment  date.  If  the  registered  bonds  or  notes  are  presented  to  a 
Federal  Reserve  Bank,  delivery  of  the  coupon  bonds  or  notes  to  be 
issued  upon  exchange  may  be  made  by  the  Federal  Reserve  Bank, 
when  so  authorized  by  the  Secretary  of  the  Treasury,  Division  of 
Jx»ans  and  Currency,  but  only  after  the  registered  bonds  or  notes 
have  been  transmitted  to  the  Treasury  Department  and  the  registra- 
tion discharged. 

Transfers  of  Registered  Bonds  and  Notes — Assignments. — In  or- 
der to  effect  the  transfer  of  a  registered  bond  or  note,  the  registered 
holder  thereof,  or  some  one  duly  authorized  to  act  for  him,  must  go 
before  one  of  the  officers  authorized  by  the  Secretary  of  the  Treasury 
to  witness  assignments,  must  establish  his  identity,  and  in  the  pres- 
ence of  such  witnessing  officer  nrust  execute  an  assignment  on  the 
form  appearing  on  the  back  of  the  bond  or  note.  No  alterations  or 
erasures  should  be  made  in  assignments;  assignments  bearing  altera- 
tions or  erasures  not  explained  to  the  satisfaction  of  the  Treasury 
Department  will  be  rejected.  Detached  assignments  will  not  be  ac- 
cepted. Assignments  of  registered  bonds  and  notes  should  be  made 
to  the  transferee,  or,  if  desired,  to  the  Secretary  of  the  Treasury  for 
transfer  into  the  name  of  the  transferee,  who  should  be  named.  As- 
signments must  not  be  made  to  "The  Secretary  of  the  Treasury  for 
transfer,"  or  to  "The  Secretary  of  the  Treasury."  Registered  bonds 
and  notes  may  be  assigned  in  blank,  but  when  so  assigned  are  in 
effect  payable  to  bearer  and  lack  the  protection  which  registration 
affords.  If  the  assignment  is  made  by  any  one  other  than  the  reg- 
istered owner,  appropriate  evidence  of  the  authority  of  such  person 
must  be  produced  and  must  accompany  the  bond  or  note,  unless 
already  on  file  with  the  Secretary  of  the  Treasury.  Powers  of  at- 
torney to  assign  registered  bonds  or  notes  must  be  acknowledged  In 
the  presence  of  one  of  the  officers  authorized  to  witness  assignments. 
Registered  bonds  or  notes  presented  for  transfer  or  exchange  with 
assignments  which  are  Imperfect  or  not  supported  by  the  required 
authority,  will  be  passed  for  transfer  or  exchange  only  when  the 
imperfections  have  been  corrected  or  the  required  authority  furnished; 
if  in  the  meantime  the  transfer  books  close  in  anticipation  of  an 
interest  payment,  action  with  respect  to  any  such  transfer  or  ex- 
change will  not  be  taken  until  the  transfer  books  reopen,  and  interest 
accordingly  will  be  paid  to  the  holder  of  record  at  the  time  the 
transfer  books  closed. 

Where  a  bond  is  to  be  divided  among  two  or  more  parties,  the  assign- 
ment should  state  the  name  of  each  and  the  amount  to  be  issued  to 


404 

him.  If  only  a  part  of  a  bond  is  assigned  a  new  issue  for  the  re- 
mainder will  be  made  to  the  former  payee  of  the  whole  bond:  Pro- 
vided, liowever,  That  the  amount  assigned  shall  correspond  with  one 
or  more  of  the  denominations  in  which  the  bonds  are  issued. 

In  affixing  his  signature  to  an  assignment  the  assignor  should  sign 
in  the  exact  form  in  which  his  name  appears  on  the  face  of  the  bond, 
or  if  the  assignor  is  other  than  the  payee  of  the  bond  he  should  sign 
in  the  exact  form  in  which  his  name  appears  in  the  power  of  authority. 
If  the  bond  be  issued  to  a  firm,  the  assignment  must  be  subscribed  in 
the  name  of  the  firm  by  a  member  thereof  who  is  possessed  of  au- 
thority to  sign  for  the  firm,  of  which  authority  the  officer  witnessing 
the  signature  must  be  satisfied;  if  issued  to  joint  owners,  co-trustees, 
joint  executors,  administrators,  or  guardians,  each  person  must  sign 
for  himself;  if  to  a  corporation  or  company,  the  authority  of  the  person 
who  assigns  the  bonds  should  be  granted  by  a  resolution  of  the  board 
of  directors,  designating  the  officer  or  other  person  by  name,  and  a 
certified  copy  of  such  resolution,  under  seal,  should  be  furnished 
the  department.  This  resolution  should  be  certified  by  some  officer 
of  the  corporation  or  company  other  than  the  one  authorized  to  ex- 
ecute assignments.  In  case  an  officer  is  not  designated  by  name  a 
certificate  under  seal  mlust  be  furnished  setting  forth  the  name  of 
the  person  in  such  office. 

Where  the  charter  or  by-laws  of  a  corporation  or  company,  or  a 
resolution  of  its  board  of  directors,  authorizes  the  holder  of  a  par- 
ticular office  to  execute  assignments  of  bonds,  a  certified  copy  of 
charter,  by-laws,  or  resolution  should  be  furnished,  together  with  a 
certificate  tinder  seal  giving  the  name  of  the  person  holding  sucb 
office.  When  on  account  of  death,  or  from  any  other  cause,  such  per- 
son ceases  to  act,  before  the  bonds  held  by  him  are  assigned,  it  will 
be  necessary  for  the  successor  in  said  office  to  file  evidence  of  his 
election  or  appointment. 

All  such  evidence  of  authority  will  be  placed  on  file  in  the  depart- 
ment, and,  if  general  and  permanent  in  its  character,  need  not  be 
reproduced  in  subsequent  transactions  under  the  same  power,  if  proper 
reference  be  made  thereto. 

An  assignment  made  by  mark  (x)  must  be  witnessed  by  at  least 
one  person  besides  the  officer  verifying  the  assignment. 

A  bond  standing  in  the  maiden  name  of  a  woman  who  has  married 
since  its  issue  should  be  assigned  in  such  a  manner  that  both  maiden 
/name  and  married  name  will  appear  in  her  signature  to  the  assign- 
ment, I.  e.,  Mary  Jones,  now  by  marriage  Mary  Brown.  Bonds  should 
be  assigned  to  a  married  woman  in  her  personal  name  and  not  in  the 
name  of  her  husband,  i.  e.,  Mrs.  Mary  Brown,  not  Mrs.  John  Brown. 


405 

Assignments  by  Attorney  in  Fact. — A  person  entitled  to  assign 
bonds  may,  by  a  duly  executed  power  of  attorney,  appoint  an  attorney 
in  fact  for  that  purpose.  By  virtue  of  the  authority  so  conferred,  the 
attorney  can  execute  the  assignments  in  the  same  manner  as  the  prin- 
cipal and,  provided  the  power  of  attorney  authorizes  him  to  do  so, 
he  may  appoint  one  or  more  substitutes  to  act  in  his  place.  An  assign- 
ment by  an  attorney  in  fact  or  his  substitute  to  himself  individually 
is  void  unless  sanctioned  by  a  court  of  competent  jurisdiction;  in 
which  case  a  certified  copy  of  the  court  order  must  be  filed  with  the 
department. 

Where  in  a  foreign  countr3r  it  is  the  custom  to  file  powers  of  at- 
torney in  public  offices  and  furnish  certified  copies  therefrom,  a  certi- 
fied copy,  properly  authenticated  by  a  United  States  diplomatic  or 
consular  officer,  or  commercial  agent,  may  be  accepted;  but  in  all 
other  cases  the  original  power  of  attorney  must  be  filed  with  the 
department. 

No  officer  of  the  Treasury  of  the  United  States  should  be  selected 
as  such  attorney. 

Powers  of  attorney  authorizing  the  assignment  of  bonds  should  be 
sent,  for  record,  to  the  Secretary  of  the  Treasury,  Division  of  Loans 
and  Currency. 

Powers  of  attorney  to  assign  or  transfer  registered  bonds  must  be 
acknowledged  in  the  presence  of  one  of  the  officers  authorized  to 
witness  assignments. 

The  following  form  may  be  used: 

FORM    OF    POWEB    OF    ATTORNEY 

Know  all  men  oy  these  presents: 

That  I ,  do  hereby  appoint  my  at- 
torney to  sell  and  assign  any  and  all  United  States  bonds  now  standing 
(or  which  may  hereafter  stand)  in  my  name,  or  which  may  be  assigned 
to  me,  granting  to  said  attorney  full  power  to  appoint  one  or  more 
substitutes  for  that  purpose,  hereby  ratifying  and  confirming  all  that 
may  be  lawfully  done  by  virtue  hereof. 

Witness  my  hand  and  seal  this  the day  of A.  D.  192. . . 

[seal] 

Executed  before  me  this  the day  of A.  D.,  192.  . . 


[official  seal.] 

Note. — To  be  verified  in  accordant  with  instructions  contained  under 
head  of  acknowledgments. 


406 

The  above  form  is  for  general  authority.  If  it  is  desired  to  grant 
specific  authority  only,  the  form  should  be  modified  by  striking  out 
the  words  "any  and  all"  and  write  after  the  word  "assign"  the  amount 
and  description  of  the  bonds. 

Forms  of  Resolittions  Grafting  Authority  to  Assign  Registered 
Bonds. — 

Form  2405. 

resolution. 

Permanent  and  full  authority  to  assign  registered  bonds  that  are 
transferable  on  the  books  of  the  Treasury  Department. 

At  a  regular  meeting  of  the  board  of  directors  of  the ,  held  at 

on  the day  of A.  D.,  192 . . ,  it  was 

Resolved  that   ,  the  president,  and   the   be,  and 

they  are  hereby,  jointly  and  severally,  authorized  and  empowered  to 
sell,  assign,  and  transfer  all  or  any  United  States  registered  bonds,  or 
registered  bonds  of  any  description  now  standing,  or  which  may  here- 
after be  registered  in  the  name  of upon  the  books  of  the  United 

States  Treasury  Department,  and  to  appoint  one  or  more  attorneys  for 
that  purpose;  and  also,  all  or  any  United  States  registered  bonds,  or 
registered  bonds   of   any   description   which   are   transferable   on   the 

books  of  the  Treasury  Department  which  this   now  owns  and 

holds,  or  may  hereafter  acquire,  by  assignment  or  mesne  assignments 
from  the  party  in  whose  name  the  same  is  inscribed,  with  full  power  to 

appoint  a  substitute;  and  also,  as  the  representative  of  this , 

all  or  any  United  States  registered  bonds,  or  registered  bonds  of  any 
description  which  are  transferable  on  the  books  of  the  Treasury  De- 
partment which  this Is,  or  shall  be,  authorized  and  empowered 

to  sell,  assign,  and  transfer  as  attorney  for  the  owners  and  holders 
thereof,  with  full  power  to  appoint  a  substitute. 

I  certify  the  foregoing  to  be  a  true  copy  from  the  minutes. 

[seal]  , 

Secretary  of  the  Board  of 

This  resolution  should  be  certified  by  some  officer  of  the  institution 
other  than  the  one  empowered  to  assign  the  bonds. 

It  is  recommended  that  resolutions  be  adopted  only  at  regular  meet- 
ings. But  when  passed  at  a  special  meeting,  the  certificate  must  be 
signed  by  two  officers. 


407 

Form  2406. 
resolution  for  assignment  of  united  states  bonds. 
At  a  regular  meeting  of  the  board  of  ,  of  the   


held 192. .,  it  was,  on  motion  resolved  that be,  and  .... 

hereby  authorized   and   empowered  to   sell   and   assign* United 

States  kegistered  bonds  now  standing,  or  which  may  hereafter  stand, 

in  the  name  of  this  ,  and  to  appoint  one  or  more  attorneys  for 

that  purpose. 

I  certify  that  the  above  is  a  true  copy  from  the  minutes. 

[seal]  , 

Secretary  of  Board  of 

*N.  B. — To  make  this  authority  general  and  permanent,  write  after 
the  word  "assign"  any  or  all. 

To  make  this  authority  special  or  specific,  write  after  the  word 
"assign"  the  amount  and  description  of  the  bonds  to  be  assigned.  In 
the  former  case  the  authority  remains  in  force  until  revoked,  and 
covers  all  present  or  future  assignments;  in  the  latter  it  ceases  and 
terminates  with  the  transaction  specified. 

This  resolution  should  be  certified  by  some  officer  of  the  institution 
other  than  the  one  empowered  to  assign  the  bonds. 

It  is  recommended  that  resolutions  be  adopted  only  at  regular  meet- 
ings. But  when  passed  at  a  special  meeting  the  certificate  must  be 
signed  by  two  officers,  Form  No.  2407. 


Form  2407. 
resolution  for  assignment  of  united  states  bonds. 

We  certify  that  at  a  special  meeting  of  the  board  of of 

held  at   ,  on  the   day  of  192 . .,,  at   o'clock 

m,   the   following   resolution   was   adopted   and   is   now   in   full 

force,  viz.: 

Resolved  that   be,  and   hereby  authorized  and 

empowered  to  sell  and  assign*   United  States  registered  bonds 

now  standing,  or  which  may  hereafter  stand,  in  the  name  of  this 

and  to  appoint  one  or  more  attorneys  for  that  purpose;  and  we  certify 
that  notice  was  duly  given  personally  to  all  members  of  the  said  board 

of of  the  said  time  and  place  of  said  meeting,  and  of  the  object 

thereof,  for  more  than days  prior  thereto,  and  in  time  to  enable 


408 

all  to  attend  said  meeting;  and  that  at  such  meeting  so  held  a  quorum 
of  all  the  members  of  said  board  was  present  and  voted  for  the  adop- 
tion of  said  resolution. 

(Signature) 

(Title) 

(Signature) , 

(Title) 

[seal] 

*N.  B. — To  make  this  authority  general  and  permanent,  write  after 
the  word  "assign"  any  or  all. 

To  make  this  authority  special  or  specific,  write  after  the  word 
"assign"  the  amount  and  description  of  the  bonds  to  be  assigned. 
In  the  former  case  the  authority  remains  in  force  until  revoked,  and 
covers  all  present  or  future  assignments;  in  the  latter  it  ceases  and 
terminates  with  the  transaction  specified. 

Use  form  No.  2406  for  resolutions  adopted  at  regular  meetings. 

FORM  OF  AUTHORITY  UNDER  BY-LAWS. 

At  the  annual  meeting  of  the  stockholders  of  the  of 

,  held ,  192 . . , was  duly  elected  president,  and  

was  duly  elected  cashier;  and  as  such  they  are  jointly  or  sev- 
erally empowered  by  the  by-laws  (a  certified  copy  of  which  is  hereto 
annexed)  to  sell  and  assign  any  and  all  United  States  bonds  now  stand- 
ing (or  which  may  hereafter  stand)  in  the  name  of  this  bank  (or 
institution). 

,  Secretary. 

[CORPORATE   SEAL.*]  

*If  the  bank  or  institution  has  no  corporate  seal,  an  affidavit  of 
one  of  the  officers  to  that  effect  should  accompany  the  authority. 

Officers  Authorized  to  Witness  Assignments. — The  following  offi- 
cers are  authorized  to  witness  the  execution  and  acknowledgment  of 
the  assignment  of  United  States  registered  bonds  and  notes: 

Judges  and  clerks  of  United  States  courts; 

United  States  district  attorneys; 

United  States  collectors  of  customs; 

United  States  collectors  of  internal  revenue; 

Assistant  treasurers  of  the  United  States  at  Boston,  New  York, 
Philadelphia,  Baltimore,  Cincinnati,  Chicago,  St.  Louis,  New  Or- 
leans, and  San  Francisco; 

Executive  officers  of  the  Federal  Reserve  Banks  located  in  Boston, 
New  York,  Philadelphia,  Cleveland,  Richmond,  Atlanta,  Chicago, 


409 

St.  Louis,  Minneapolis,  Kansas  City,  Dallas,  and  San  Francisco, 
and  of  the  branches  thereof; 
Executive  officers  (authorized  to  perform  acts  attested  under  the 
seal  of  their  respective  institutions)  of  incorporated  banks  and 
trust  companies  in  the  United  States  (including  incorporated 
savings  banks),  whether  or  not  members  of  the  Federal  Reserve 
System,  and  the  branches  thereof,  domestic  and  foreign,  and  of 
incorporated  banks  and  trust  companies  in  Alaska  and  the  insular 
possessions  of  the  United  States  doing  business  under  Federal 
charter  or  organized  under  Federal  law;  and,  in  addition,  man- 
agers of  branches  of  such  incorporated  banks  and  trust  companies 
whose  signatures  are  certified  to  the  Treasury  Department  under 
the  seal  of  the  parent  institution; 
Commanding  officers  of  the  Army,  Navy,  and  Marine  Corps  of  the 
United  States  (for  members  of  the  military  and  naval  establish- 
ments of  the  United  States)  ; 
Diplomatic  and  consular  representatives  and  commercial  agents  of 

the  United  States  on  duty  abroad; 
Registered  bonds  and  notes  may  also  be  assigned  at  the  Treasury 
Department,  "Washington.  If  in  a  foreign  country,  assignments  should 
be  made  before  a  diplomatic  or  consular  representative  or  commercial 
agent  of  the  United  States;  if  no  such  officer  is  accessible,  the  assign- 
ment may  be  made  before  a  notary  public,  or  other  competent  officer, 
but  his  official  character  and  jurisdiction  must  be  duly  certified  to  the 
Treasury  Department. 

A  Notaby  Public,  a  Justice  of  the  Peace,  or  a  Commissioner  of 
Deeds  is  Not  Authorized  to  Witness  an  Assignment. — In  the  event 
that  none  of  the  officers  authorized  to  witness  assignments  is  readily 
accessible,  the  Secretary  of  the  Treasury  will,  upon  application,  make 
special  provision  for  the  particular  case.  In  all  cases  the  witnessing 
officer  must  affix  to  the  assignment  his  official  signature,  title,  address, 
and  seal,  and  the  date  of  the  assignment;  officers  of  incorporated 
banks  and  trust  companies  must  affix  the  seal  of  the  bank  or  trust 
company.  If  the  officer  does  not  possess  an  official  seal  that  fact 
should  be  made  known  and  attested.  Witnessing  officers  must  require 
positive  identification  of  assignors  as  known  and  responsible  persons. 
No  officer  of  the  United  States,  at  home  or  abroad,  is  authorized  to 
charge  a  fee  for  witnessing  the  assignment  of  United  States  registered 
bonds  or  notes,  and  banks  and  trust  companies  generally  impose  no 
charge  for  the  service. 

Powers  of  Substitution. — Powers  of  substitution  must  be  acknowl- 
fffgod  in  the  same  manner  as  powers  of  attorney  and  should  likewise 
follow  the  same  general  form. 


410 

Form  of  Power  of  Substitution  to  Sell  and  Assign  Bonds. — 

Knoio  all  men  ty  these  presents,  That   ,  by  virtue  of 

authority  conferred  upon    in  and  by  the  letter  of  attorney  of 

dated   do  hereby  substitute  and  appoint   

Attorney  for   ,  and  in   name  to  sell  and  assign 

( $ )   U.   S %  Registered   Bonds,  Act   now- 
standing  in  the  name  of 

on  the  books  of  the  Treasury  Department;   hereby  ratifying  and  con- 
firming all  that  may  be  lawfully  done  by  virtue  hereof. 
Witness   hand     and  seal     this   .. day  of   ,  19... 


Executed  in  the  presence  of of  the 

in  the  State  of  

(The  seal  should  always  be  impressed.  ) 


Assignments  in  Case  of  Death  of  Registered  Owner. — In  case  of 
the  death  of  the  holder  of  registered  bonds  or  notes,  if  the  decedent 
leave  a  will  which  is  duly  admitted  to  probate,  or  die  intestate  and 
the  estate  is  administered  in  a  court  of  competent  jurisdiction,  assign- 
ment may  be  made  only  by  the  duly  appointed  representative  of  the 
estate.  Assignments  made  by  executors  or  administrators,  or  other 
duly  appointed  representatives,  must  be  supported  by  a  duly  executed 
certificate  under  seal  from  the  court  appointing  such  representative, 
dated  not  more  than  90  days  prior  to  the  execution  of  the  assignments, 
showing  the  appointment  and  qualification  of  such  representative  and 
that  the  appointment  is  still  in  force,  or,  in  the  absence  of  such  a 
certificate,  by  duly  certified  copies  of  the  representative's  letters  of 
appointment.  If  the  decedent  die  intestate  and  the  gross  value  of 
the  estate,  both  real  and  personal,  does  not  exceed  $250  in  value,  or 
the  estate  of  such  decedent  is  expressly  exempt  from  administration 
under  the  laws  of  the  State  of  the  decedent's  domicile,  assignments 
by  the  person  or  persons  entitled  to  the  bonds  or  notes  under  the  laws 
of  the  State  of  the  decedent's  domicile  may  be  recognized,  without 
administration,  upon  presentation  of  proof  satisfactory  to  the  Secretary 
of  the  Treasury  that  the  funeral  expenses  and  debts  of  the  decedent 
have  been  paid  or  provided  for,  and  that  such  person  or  persons  are 
entitled  to  the  bonds  or  notes.  Such  proof  will,  in  general,  Include 
affidavits  of  the  persons  claiming  to  be  entitled,  setting  forth  all  the 
facts  in  detail,  supported  by  affidavits  of  at  least  two  disinterested 
persons,  and  by  the  official  certificate  or  other  proof  of  death  of  the 
registered  holder;  and  in  cases  where  any  of  the  persons  entitled  are 


411 

minors  or  under  disability  no  assignment  will  be  permitted  unless  to 
them,  or  upon  compliance  with  the  Treasury  Department  regulations 
as  to  assignments  by  or  for  such  persons.  The  Secretary  of  the 
Treasury  may  also  require  in  any  such  case  a  bond  of  indemnity 
with  satisfactory  sureties. 

Foreign  Successorship  Assignments. — "Where  a  payee,  at  the  time 
of  his  death,  was  a  resident  of  a  foreign  country,  the  party  claiming 
to  direct  and  execute  the  transfer  must  furnish  an  exemplified  copy  of 
the  will  or  other  instrument  conveying  the  requisite  authority,  duly 
certified  under  the  hand  and  seal  of  the  proper  officer,  attested  by  the 
certificate  of  a  United  States  diplomatic  or  consular  officer  or  com- 
mercial agent  or,  if  there  be  none  such  accessible  (which  fact  shall, 
in  such  case,  be  certified),  by  that  of  a  notary  public  or  other  com- 
petent officer,  to  the  effect  that  such  exemplified  copy  is  executed  and 
granted  by  the  proper  tribunal  or  officer  and  is  in  due  form  and 
according  to  the  laws  of  that  country.  The  assignment  should  be  ex- 
ecuted as  hereinbefore  directed. 

Assignments  in  Case  of  Disability  of  Registered  Owner. — In  case 
of  mental  disability  or  other  legal  incompetency  of  the  holder  of 
registered  bonds  or  notes,  assignments  may  be  made  by  the  guardian 
or  other  legally  appointed  representative  of  the  holder  upon  presenting 
(proof  satisfactory  to  the  Secretary  of  the  Treasury  of  his  appointment 
and  authority  to  assign  such  bonds  or  notes. 

Assignments  for  Minors. — Bonds  or  notes  registered  in  the  name  of 
a  minor  or  of  a  guardian  for  a  minor  may  be  assigned  during  minority 
only  by  the  guardian  legally  appointed  by  a  court  of  competent 
jurisdiction,  or  otherwise  legally  qualified,  or  pursuant  to  order  or 
decree  of  a  court  of  competent  jurisdiction;  provided,  however,  that 
in  cases  where  such  bonds  or  notes  have  been  purchased  by  the  natural 
guardian  of  the  minor  out  of  his  own  funds  as  a  gift  to  the  minor, 
or  otherwise  purchased  for  the  benefit  of  the  minor,  and  registered 
in  the  name  of  the  minor,  or  in  the  name  of  such  natural  guardian  for 
the  minor,  and  the  entire  gross  value  of  the  minor's  estate,  both  real 
and  personal,  does  not  exceed  $250,  assignments  by  the  natural  guar- 
dian for  transfer  or  for  exchange  into  coupon  bonds  or  notes,  may  be 
recognized  upon  presentation  of  proof  satisfactory  to  the  Secretary  of 
the  Treasury  that  the  proceeds  of  the  bonds  or  notes  so  assigned 
are  necessary,  and  are  to  be  used  for,  the  support  or  education  of  the 
minor.  The  Secretary  of  the  Treasury  may  also  require  in  any  such 
case  a  bond  of  iBdemnity  with  satisfactory  sureties. 


412 

Bonds  or  Notes  Registered  in  the  Names  of  Two  oe  More  Persons. — 
"When  bonds  or  notes  are  registered  in  the  names  of  two  or  more 
persons,  in  substantially  the  form  "John  Jones  and  Mary  Jones," 
or  "John  Jones  or  Mary  Jones,"  or  "John  Jones  and  Mary  Jones,  or 
the  survivor,"  the  bonds  or  notes  are  deemed  to  be  held  in  joint 
ownership,  with  right  of  survivorship,  and  during  the  lives  of  the 
co-owners  the  Treasury  Department  will  require  assignments  by  all 
in  cases  of  transfer.  Interest  will  be  paid  to  any  one  of  such  co- 
owners.  In  case  of  the  death  of  any  such  co-owner,  the  Department 
will,  upon  satisfactory  proof  of  death  and  survivorship,  recognize  the 
survivor  or  survivors  as  owners,  and  will  honor  assignments  by  such 
survivor  or  survivors  without  regard  to  any  administration  of  the  es- 
tate of  the  deceased  co-owner.  Bonds  and  notes  should  not  be  registered 
in  the  form  "John  Jones  or  Mary  Jones,  or  either  of  them,"  but,  if  so 
registered,  assignments  by  all  the  co-owners  will  be  required  in  cases 
of  transfer,  and  no  right  of  survivorship  will  be  recognized. 

Presentation  or  Registered  Bonds  or  Notes  for  Transfer. — After 
the  assignment  of  a  registered  bond  or  note  has  been  duly  executed, 
the  bond  or  note  should  be  forwarded,  at  the  risk  and  expense  of  the 
owner,  direct  to  the  Secretary  of  the  Treasury,  Division  of  Loans  and 
Currency,  Washington,  D.  C,  or  to  a  Federal  Reseve  Bank,  accompanied 
by  specific  instructions  for  the  issue  and  delivery  of  the  new  bond 
or  note,  which  must  in  all  cases  be  in  accordance  with  the  assignments. 
(Use  Form  L.  &  C.  144,  copies  of  which,  or  of  a  substantially  similar 
form,  may  be  obtained  from  any  Federal  Reserve  Bank  or  from  the 
Treasury  Department.) 

New  Bonds. — Registered  bonds  received  for  transfer  are  canceled, 
and  new  bonds  in  their  stead  are  issued  in  the  name  of  the  assignee. 
These  bear  interest  from  the  first  day  of  the  interest  period  in  which 
the  transfer  shall  have  been  made.  The  Department  endeavors  to  make 
returns  on  the  same  day  that  the  bonds  are  received,  but  since  the 
issuance  of  the  several  Liberty  issues  it  usually  takes  several  days 
to  complete  the  process.  The  Department  makes  no  charge  for  trans- 
ferring bonds.  When  bonds  are  sent  or  returned  by  express  the  entire 
expense  thus  incurred  must  be  borne  by  the  party  sending  or 
receiving  the  bonds.  Bonds  received  for  transfer  during  the  period 
the  books  are  closed  against  such  transfers  will  be  reissued  as  soon  as 
the  books  reopen. 

Change  of  Name  or  Correction  of  Name  of  Owners  of  Registered 
Bonds  or  Notes. — Assignments  to  cover  change  of  name  or  correction 
of  name  of  the  owner  must  be  witnessed  and  acknowledged  as  pro- 
vided  in   the   case   of   transfers.     If   a  bond   or   note   stands    in   the 


413 

maiden  name  of  a  woman  who  has  since  married  and  it  is  desired 
(1)  to  transfer  the  bond  or  note  to  another  person,  or  (2)  to  correct 
the  registration  record,  the  bond  or  note  should  be  appropriately- 
assigned  in  such  manner  that  both  maiden  name  and  married  name 
appear  in  the  signature  to  the  assignment;  e.  g.,  Miss  Mary  Jones,  now 
by  marriage,  Mrs.  Mary  Brown.  A  married  woman's  personal  (legal) 
name  must  be  used  and  not  her  husband's.  If  an  error  has  been 
made  in  inscribing  the  name  of  the  owner  of  a  registered  bond  or 
note,  the  owner  should  return  the  bond  or  note  to  the  Secretary  of 
the  Treasury,  Division  of  Loans  and  Currency,  for  correction.  If  the 
directions  for  the  issue  of  such  bond  or  note  were  transmitted  by 
a  bank  or  trust  company  or  through  a  Federal  Reserve  Bank,  the  bond 
or  note  should  be  returned  by  the  owner  through  such  bank  or  trust 
company,  or  Federal  Reserve  Bank,  accompanied  by  full  explanation 
and  instructions.  Bonds  or  notes  so  returned  for  correction  should 
be  assigned  to  the  owner  in  the  correct  name  and  assigned  by  him  in 
the  name  as  it  appears  on  the  face  of  the)  bond  or  note.  If  the 
correction  involves  a  substantial  change  in  name,  the  Department 
may  require  additional  certification. 

Change  of  Address  of  Owners  of  Registered  Bonds  or  Notes. — 
Checks  issued  in  payment  of  interest  on  United  States  registered 
bonds  or  notes  are  mailed  to  registered  holders  at  their  addresses 
of  record.  Notification  of  any  change  in  address  of  any  registered 
holder  should  be  sent  immediately  to  the  Secretary  of  the  Treasury, 
Division  of  Loans  and  Currency,  Washington,  D.  C.  In  giving  such 
notification,  the  serial  number,  denomination,  and  title  of  the  bonds  or 
notes  involved  must  be  given,  the  old  and  new  addresses  set  forth, 
and  the  request  signed  in  same  manner  as  the  bonds  or  notes  are 
inscribed.  (Use  Form  L.  &  C.  228,  copies  of  which,  or  of  a  substan- 
tially similar  form,  may  be  obtained  from  any  Federal  Reserve  Bank 
or  from  the  Treasury  Department.)  Ordinarily  it  will  not  be  possible 
to  take  notice  of  a  change  in  address  during  any  period  when  the 
transfer  books  of  the  loan  in  question  are  closed. 

Nonrecettt  or  Loss  of  Interest  Checks. — If  an  interest  check  is 
not  received  within  a  reasonable  period  after  an  interest  payment 
date,  or  if  the  check  is  lost  after  recedpt,  the  fact  of  non-receipt  or 
loss  should  be  reported  to  the  Secretary  of  the  Treasury.  Division 
of  Loans  and  Currency,  "Washington,  D.  C,  with  request  that  payment 
of  such  check  be  stopped.  This  notification  should  include  a  descrip- 
tion of  the  registered  bonds  or  notes,  the  title  of  the  loan,  and  the 
serial  numbers  and  denominations  of  the  bonds  or  notes.  If  the  check 
subsequently   is  recovered,  request  for  the  removal  of  the  stoppage 


414 

should  likewise  be  sent  the  Secretary  of  the  Treasury,  Division  of 
Loans  and  Currency.  Duplicates  for  lost  interest  checks  may  be 
secured  upon  compliance  with  the  Treasury  Department  regulations, 
as  to  which  full  information  may  be  obtained  upon,  application  to  the 
Secretary  of  the  Treasury,  Division  of  Loans  and  Currency. 

Address  fob  Communications. — All  communications  relating  to 
United  States  registered  bonds  or  notes  and  interest  thereon  should 
be  addressed  to  The  Secbetaby  of  the  Tbeasuby,  DrvisiON  of  Loans 
and  Curbency,  Washinqton,  D.  C,  except  that  communications  relat- 
ing to  bonds  or  notes  presented  to  a  Federal  Reserve  Bank  should 
be  addressed  to  that  bank. 


Lost,  Stolen,  ob  Destboyed  Bonds  ob  Notes. — Coupon  bonds  and 
notes  are  payable  to  bearer  and  title  thereto  passes  by  delivery;  if 
they  are  lost  or  stolen  the  Treasury  Department  can  grant  no  relief 
under  existing  law,  but  if  destroyed,  duplicates  may  be  issued.  In 
case  of  the  loss,  theft,  or  destruction  of  registered  bonds  or  notes,  the 
bonds  or  notes  may  be  replaced,  unless  assigned  in  blank.  All  cases 
of  lost,  stolen,  or  destroyed  bonds  or  notes  should  be  reported  to  the 
Secretary  of  the  Treasury,  Division  of  Loans  and  Currency,  Wash- 
ington, D.  C.  The  Treasury  Department  assumes  no  responsibility- 
whatever  with  respect  to  coupon  bonds  or  notes  so  reported,  but  if 
subsequently  the  coupon  bonds  or  notes  are  presented  for  exchange 
or  otherwise,  attempt  will  be  made  to  advise  the  person  who  reported 
the  loss.  In  cases  of  registered  bonds  or  notes  reported  lost,  stolen,  or 
destroyed,  caveats  will  be  entered  against  the  transfer,  exchange,  or 
payment  of  such  bonds  or  notes.  In  the  event  that  bonds  or  notes 
reported  lost,  stolen,  or  destroyed  subsequently  are  recovered,  report 
thereof  should  be  made  to  the  Secretary  of  the  Treasury.  The  law 
requires  with  respect  to  claims  for  the  issue  of  duplicates  of  destroyed 
coupon  bonds  or  notes  that  the  bonds  or  notes  shall  be  identified  by 
number  and  description;  accordingly,  all  holders  of  coupon  bonds  or 
notes  should  keep  a  careful  and  authentic  record  of  their  holdings. 
Full  information  with  respect  to  submitting  claims  for  the  issue  of 
duplicate  bonds  or  notes  may  be  had  upon  application  to  the  Secretary 
of  the  Treasury,  Division  of  Loans  and  Currency,  Washington,  D.  C. 

MuTn.ATED  ob  Defaced  Bonds  ob  Notes. — If  through  accident,  inad- 
vertence, or  otherwise,  bonds  or  notes  have  become  mutilated  or  de- 
faced, the  bonds  or  notes  may  be  forwarded  to  the  Secretary  of  the 
Treasury,  Division  of  Loans  and  Currency,  Washington,  D.  C,  prefer- 
ably through  the  appropriate  Federal  Reserve  Bank,  accompanied  by 


415 

affidavits  furnishing  proof  of  the  ownership  of  the  bonds  or  notes  and 
setting  forth  the  circumstances  under  which  the  mutilation  or  deface- 
ment occurred.  The  Department  will  give  appropriate  consideration 
to  each  case  and  advise  the  owner  whether  relief  can  be  given  by 
the  issue  of  new  bonds  or  notes. 

Conversions  of  Liberty  Bonds  or  Victory  Notes. — Holders  of  First 
Liberty  Loan  Converted  4  per  cent,  bonds  of  1932-1947  and  of  Second 
Liberty  Loan  4  per  cent,  bonds  of  1927-1942  have  the  privilege  of 
converting  their  bonds  into  4*4  per  cent,  bonds  pursuant  to  the  ex- 
tension of  the  conversion  privilege,  in  accordance  with  the  provisions 
of  Treasury  Department  Circular  No.  137,  dated  March  7,  1919,  as 
amended  and  supplemented  June  10,  1919,  to  which  reference  is  hereby 
made.  There  is  no  other  conversion  privilege  now  open  to  holders  of 
Liberty  Bonds.  Reference  is  also  made  to  Treasury  Department  Cir- 
cular No.  158,  dated  September  8,  1919,  which  prescribes  further  rules 
and  regulations  as  to  the  exchange  and  conversion  of  4  per  cent, 
coupon  Liberty  bonds.  Under  the  terms  of  said  Department  Circular 
No.  137,  as  amended  and  supplemented,  bonds  of  the  First  Liberty 
Loan  Converted  and  of  the  Second  Liberty  Loan  Converted  issued  upon 
conversion  of  4  per  cent,  bonds  pursuant  to  the  extension  of  conversion 
privilege,  bear  interest  at  the  rate  of  4%  per  cent,  per  annum  from 
the  semi-annual  interest  payment  date  next  succeeding  the  date  of 
presentation  for  conversion.  Anything  herein  to  the  contrary  not- 
withstanding, (a)  coupon  bonds  issued  upon  such  conversions  may 
be  exchanged  for  coupon  bonds  of  other  denominations  or  for  registered 
bonds  before  the  date  when  they  begin  to  bear  interest  at  4*4  per 
cent,  per  annum,  and  in  that  event  the  bonds  issued  upon  exchange 
will  not  begin  to  bear  interest  until  such  date,  and  (b)  no  transfers 
of  registered  bonds  heretofore  or  hereafter  issued  upon  such  con- 
versions, nor  exchanges  of  such  registered  bonds  for  coupon  bonds, 
will  be  effected  in  advance  of  the  semi-annual  interest  payment  date 
from  which  the  respective  bonds  bear  interest  at  the  rate  of  41/!  per 
cent,  per  annum.  In  case  such  registered  bonds  are  presented  for 
transfer  or  exchange  in  advance  of  such  semi-annual  interest  payment 
date,  the  transfer  or  exchange  will  be  effected  as  of  such  date.  De- 
livery of  the  bonds  to  be  issued  upon  such  transfer  or  exchange  may 
be  made  in  advance  of  such  date,  but  the  interest  at  the  rate  of  4 
per  cent,  per  annum  to  such  semi-annual  interest  payment  date  shall 
be  paid  as  if  such  delivery  had  not  been  made. 

Treasury  Department  Circular  No.  139,  dated  May  20,  1919,  to  which 
reference  is  hereby  made,  prescribes  rules  and  regulations  under  which 
the  two  series  of  Victory  notes  may  be  converted. 


416 

Transportation  Charges  and  Risks  on  Bonds  or  Notes. — Trans- 
portation charges  and  risks  upon  bonds  and  notes  presented  to  the 
Treasury  Department,  Washington,  or  a  Federal  Reserve  Bank,  for 
exchange  or  transfer,  or  for  other  purposes  included  within  the  scope 
of  this  circular,  must  be  borne  by  the  holders  of  the  bonds  or  notes 
presented,  and  the  bonds  or  notes  must  be  delivered  with  all  trans- 
portation charges  prepaid.  Registered  bonds  and  notes  to  be  de- 
livered upon  exchange  or  transfer,  or  otherwise,  unless  delivered  in 
person  to  the  registered  owner  or  his  duly  authorized  representative, 
v/ill  be  delivered  by  registered  mail  without  expense  to,  but  at  the 
risk  of,  the  registered  owner,  except  that  such  bonds  or  notes  will 
be  delivered  by  express  at  the  risk  and  expense  of  the  registered 
owner  if  written  request  for  such  delivery  be  made.  Coupon  bonds 
and  notes  to  be  delivered  upon  exchange  or  otherwise,  unless  de- 
livered in  person  to  the  owner  or  his  duly  authorized  representative, 
will  be  delivered  at  the  owner's  risk  and  expense,  and,  in  the  absence 
of  other  written  instructions  and  remittances  to  cover  expenses,  will 
be  delivered  by  express  collect.  Inasmuch  as  the  cost  of  transporta- 
tion of  coupon  bonds  and  notes  by  express  is  greater  than  by  registered 
mail  insured,  holders  of  bonds  and  notes  are  advised  to  consult  with 
their  own  banks  and  trust  companies  in  cases  where  transactions  in- 
volve the  transportation  of  coupon  bonds  or  notes,  for  arrangements 
may  be  made  as  between  Federal  Reserve  Banks  and  incorporated 
banks  and  trust  companies  for  the  transportation  of  such  coupon 
bonds  or  notes,  for  arrangements  may  be  made  as  between  Federal 
Reserve  Banks  and  incorporated  banks  and  trust  companies  for  the 
transportation  of  such  coupon  bonds  and  notes  to  and  *rom  Federal 
Reserve  Banks  by  registered  mail  insured,  the  charges  in  each  case 
to  be  paid  by  the  respective  holders  and  to  be  remitted  by  the  in- 
corporated banks  and  trust  companies  to  the  Federal  Reserve  Banks. 
Such  arrangements  for  the  transportation  of  coupon  bonds  and  notes 
by  registered  mail  insured  can  not  be  effected  if  transactions  are  sub- 
mitted direct  to  the  Treasury  Department,  Washington,  instead  of 
through  an  incorporated  bank  or  trust  company  to  the  appropriate 
Federal  Reserve  Bank.  Transportation  charges  and  risks  on  bonds 
and  notes  transmitted  between  Federal  Reserve  Banks  and  the  Treas- 
ury Department  under  the  provisions  of  this  circular  will  be  borne 
by  the  United  States. 

Called  Bonds. — All  United  States  called  bonds,  forwarded  for  re- 
demption, should  be  addressed  to  the  Secretary  of  the  Treasury,  Di- 
vision of  Loans  and  Currency.  When  registered  bonds  are  so  for- 
warded, they  should  be  assigned  to  "the  Secretary  of  the  Treasury  for 
redemption."  Assignments  must  be  dated  and  properly  acknowledged 
as  prescribed  in  the  note  printed  on  the  back  of  each  bond. 


417 

Where  checks  in  payment  of  registered  bonds  are  desired  in  favor 
of  anyone  but  the  payee,  the  bonds  should  be  assigned  to  the  "Secre- 
tary of  the  Treasury  for  redemption  for  account  of" — (here  insert  the 
name  of  the  person  or  persons  to  whose  order  the  check  should  be 
made  payable.) 

A  party  can  not,  as  attorney,  assign  bonds  for  redemption  for  ac- 
count of  himself  as  an  individual. 

Regulations  in  Regard  to  Coupons  Detached  from*  Called  Bonds. — 
In  accordance  with  the  decision  of  the  Attorney  General  of  the  United 
States,  dated  January  29,  1\878,  the  Treasury  Department  regards  a 
coupon  detached  from  a  bond  of  the  United  States  as  a  separate 
obligation,  the  holder  of  which  is  entitled  to  receive  the  face  value 
thereof  at  any  time  after  its  maturity  on  presentation.  The  rule  is 
therefore  established  that  United  States  coupon  bonds  which  have 
been  called  for  redemption  should  have  attached  to  them,  when  pre- 
sented for  payment,  all  of  the  unmatured  coupons.  If  any  such  cou- 
pons are  missing,  their  face  value  will  be  deducted  from  the  proceeds 
of  the  bonds  when  redeemed,  and  will  be  held  in  the  Treasury  for  the 
redemption  of  such  missing  coupons  when  they  are  presented. 

Detached  coupons  belonging  to  called  bonds,  maturing  on  dates  sub- 
sequent to  the  date  of  maturity  of  the  bonds,  will  not  be  paid  at  the 
sub-treasuries  in  the  United  States,  but  should  be  forwarded  to  the 
Treasury  Department  at  Washington  for  payment. 

Interest  on  Registered  Bonds. — Interest  on  registered  bonds  is  paid 
by  checks  drawn  at  the  Treasury  Department.  These  checks  are 
sent  by  mail  when  the  postoffice  address  is  known;  otherwise  they 
are  held  until  called  for  by  the  payees  thereof. 

Interest  checks  may  be  collected  by  agents  of  payees  duly  authorized 
by  powers  of  attorney  acknowledged  before  one  of  the  officers  au- 
thorized to  witness  the  assignments  of  registered  bonds  or  before  a 
notary  public.  If  in  a  foreign  country  powers  must  be  acknowledged 
before  a  United  States  diplomatic  or  consular  officer,  or  a  commercial 
agent,  or  a  notary  public. 

Unclaimed  Interest  and  Unpaid  Checks. — The  interest  on  registered 
bonds  of  the  loans  authorized  previously  to  the  funded  loans  author- 
ized by  the  Act  of  July  14,  1870,  which  has  been  returned  to  the 
Treasury  as  unclaimed  can  be  collected  only  in  person  or  by  attorney 
/at  the  office  of  the  Treasurer  of  the  United  States  in  Washington.  For 
the  convenience  of  the  public  and  to  save  charges,  powers  of  attorney 
to  collect  such  specified  unclaimed  interest  may  be  made  in  favor  of 
the  Chief  of  the  Division  of  Loans  and  Currency  of  the  Secretary's 
office. 

27 


418 

Interest  checks  should  not  be  held  by  the  payee,  but  should  promptly 
be  presented  for  payment,  and  when  any  interest  check)  has  been 
issued  for  a  longer  period  than  three  full  fiscal  years  it  will  be  paid 
only  through  the  settlement  of  an  account  by  the  Treasury  Depart- 
ment, and  for  this  purpose  any  such  check  should  be  transmitted 
to  the   Secretary  of  the   Treasury  for  the   necessary   action. 

Ixdobsements  on  Inteeest  Checks. — [Requirements  of  the  account- 
ing officers  of  the  Treasury  Department]  (a)  When  interest  checks 
are  presented  for  payment,  the  indorsement  of  the  payee  must  be  in 
ink  or  indelible  pencil  and  must  correspond  exactly  with  the  name 
as  printed  on  the  face  of  the  check.  Checks  are  drawn  to  the  order 
of  the  person  in  whose  favor  a  registered  bond  is  inscribed.  If  any 
variation  appears  between  the  correct  name  of  the  payee  and  his  name 
as  printed  on  the  face  of  the  check  or  his  name  as  inscribed  on  the 
facet  of  a  bond,  the  incorrect  check,  or  bond,  or  both,  should  be  re- 
turned to  the  department  for  correction. 

(6)  Officials  must  indorse  with  full  title  of  their  office;  firms,  with 
the  usual  firm  signature.  Stamped  indorsements  must  be  guaranteed 
by  the  presenting  bank,  known  to  be  responsible. 

(c)  Indorsements  by  mark  (X)  must  be  witnessed  by  two  persons 
who  can  write,  and  who  must  give  their  places  of  residence. 

(d)  When  the  Secretary  of  the  Treasury  has  been  notified  that  the 
payee  of  a  bond  is  an  infant,  checks  issued  in  payment  of  interest 
thereon  are  delivered  and  paid  only  to  the  guardian  of  such  infant, 
who  must  file  with  the  Auditor  for  the  Treasury  Department  evidence 
(1)  of  guardianship;  (2)  that  his  authority  is  in  force;  and  (3)  of 
the  identity  of  his  ward  with  the  payee  of  the  bonds.  Neither  the 
father  nor  the  mother  of  the  infant  has  the  right  to  indorse  such 
interest  checks. 

(e)  Indorsements  by  an  agent,  attorney,  guardian,  executor,  ad- 
ministrator, or  trustee  of  an  estate  are  not  recognized  unless  evi- 
dence of  authority  has  been  filed  with  the  Auditor  for  the  Treasury 
Department.  In  the  four  last-named  cases  the  certificate,  under  seal, 
of  the  probate  court  is  required.  Indorsements  by  an  agent,  attorney, 
guardian,  executor,  administrator,  or  trustee  mu|st  agree  exactly 
with  the  name  as  it  appears  on  the  certificate  of  authority.  If  the 
name  of  the  principal  differs  in  the  certificate  from  the  name  as  it 
appears  on  the  bond  or  interest  check,  the  fact  that  they  relate  to 
one  and  the  same  person  must  be  set  forth  in  the  certificate,  other- 
wise it  will  be  returned  for  correction. 

(f)  An  indorsement  by  a  firm,  joint-stock  company,  corporation, 
or  bank,  when  made  in  due  course  of  business,  will  be  deemed  suffi- 


419 

cient  without  the  previous  filing  of  a  certificate  of  authority  accom- 
panying said  check,  if  such  indorsement  is  guaranteed  by  the  bank 
presenting  such  indorsed  check  for  collection,  provided  such  pre- 
senting bank  is  considered  responsible  by  the  officer  called  upon  to 
make  such  payment. 

(<7)  Unless  checks  drawn  to  the  order  of  corporations  or  associa- 
tions are  presented  for  payment  as  set  forth  in  the  foregoing  para- 
graph (/)  evidence  of  authority,  except  in  the  case  of  presidents, 
vice  presidents,  cashiers,  or  assistant  cashiers  of  banks,  must  pre- 
viously be  filed  with  the  Auditor  for  the  Treasury  Department  or 
accompany  the  check.  Such  evidence  should  be  in  the  form  of  a 
certified  copy,  under  seal,  of  an  extract  from  the  by-laws,  showing 
the  authority  of  the  officer  to  indorse  for  the  corporation  or  society 
and  giving  his  name  and  the  date  of  his  election,  or  in  the  form  of  a 
resolution  adopted  by  the  official  board  of  such  corporation  or  society, 
designating  by  name  and  title  the  officer  or  officers  empowered  to 
collect  interest.  If  the  corporation  or  society  have  no  seal,  the  instru- 
ment must  be  acknowledged  before  a  notary  public  or  other  competent 
officer  under  his  seal. 

(h)  Interest  checks  issued  in  the  name  of  a  woman  who  marries 
after  having  acquired  a  bond  should  be  Indorsed  under  the  former 
name  as  it  appears  on  the  face  of  the  check,  and  also  In  her  married 
name,  with  sufficient  explanation  to  show  that  both  names  refer  to 
the  same  person,  as:     "Mary  Smith,  now  by  marriage,  Mary  S.  Brown." 

Issue  of  Duplicate  Interest  Checks. — Advice  of  nonrecelpt  or  loss. 
— In  the  event  of  the  nonreceipt  or  loss  of  an  interest  check  the  owner, 
better  to  protect  his  interest,  should  in  writing  notify  the  department, 
describing  the  check,  giving,  If  possible,  its  date,  number  and  amount, 
and  the  title  of  the  loan  for  interest  on  which  the  check  was  drawn, 
and  requesting  that  payment  of  same  be  stopped,  preliminary  to  the 
issue  of  a  duplicate.  Thereupon  the  department  will  furnish  special 
instructions  to  be  followed  in  obtaining  a  duplicate  check. 


PART  FOUR 

SPECIAL  ARTICLES  ON  SUBJECTS  OF  INTEREST 
TO  NATIONAL  BANKS 

CHAPTER  I. 

Organization  De  Novo. 

Section  360.  Methods  of  Organizing. 

361.  Number  of  Corporators. 

362.  Corporators — Natural  Persons. 

363.  Married  Women  As  Corporators. 

364.  Infants  As  Corporators. 

365.  Corporators — Action  by  Agent  or  Attorney. 

366.  The  Subscription  Paper. 

367.  Capital  Requirements. 

368.  Entire  Stock  to  Be  Taken  by  Bona  Fide  Subscribers. 

369.  Professional   Promoters. 

370.  Temporary  Stock  Certificates. 

371.  Application  to  Comptroller  to  Organize. 

372.  Form  of  Title. 

373.  Investigation  by  National  Bank  Examiner. 

374.  Organization  Papers. 

375.  Articles  of  Association — Form. 

376.  Signing  of  Articles. 

377.  Executed  in  Duplicate. 

378.  Naming  Directors  in  Articles. 

379.  Sliding  Scale  of  Directors. 

380.  Qualification  of  Directors. 

381.  Election  of  Directors. 

382.  Number  of  Directors. 

383.  Provision  for  Increase  of  Capital  Stock. 

384.  Provision  for  Lien  on  Stock. 

385.  Organization   Certificate — Form. 

420 


421 

Section  386.  Who  May  Be  Shareholders. 

387.  Signing  and  Acknowledgment. 

388.  Affixing  Seal. 

389.  Execution  of  Organization  Certificate. 

390.  Filing  of  Organization  Papers. 

391.  When  Association  a  Body  Corporate. 

392.  Oath  of  Directors. 

393.  Official  Signatures. 

394.  By-Laws. 

395.  Payment  on  Stock. 

396.  Book  Entry  of  Payments  on  Subscriptions. 

397.  Certificate  of  First  Payment  on  Stock — Form. 

398.  Payment  of  Deferred  Installments  on  Capital. 

399.  Deposit  of  Bonds. 

400.  The  Circulation  Privilege. 

401.  Order  for  Circulation. 

402.  Commencement  of  Business — Issue  of  Comptroller's 

Certificate. 

403.  Publication  of  Certificate. 

404.  Services  of  Attorney. 

405.  Eegulation  of  Comptroller. 

§  360.  Methods  of  Organizing. —  In  organizing  a  National 
bank  one  of  three  methods  may  be  pursued,  according  to  exist- 
ing conditions. 

1.  De  Novo — Creating  a  new  bank. 

2.  Reorganization  of  State  or  private  bank  or  co-partnership. 

3.  Conversion  of  an  incorporated  State  bank. 

The  following  chapters  will  deal  with  the  second  and  third  methods. 

§  361.  Number  of  Corporators.— Section  5133  IT.  S.  R.  S.  pro- 
vides that  any  number  of  natural  persons,  not  less  in  any  case 
than  five,  may  organize  a  National  bank. 

§  362.  Corporators — Natural  Persons.— The  corporators  must  be 
natural  persons  (Sec.  5133,  Rev.  Stat.) — that  is,  human  beings, 
as  distinguished  from  artificial  beings  which  exist  only  in  contem- 


422 

plation  of  law,  such  as  corporations  and  joint-stock  companies. 
The  reason  for  excluding  these  merely  legal  entities  is  obvious. 
Such  powers  as  they  have  are  limited,  and  in  most  cases  they  are 
not  authorized  to  become  corporators  of  another  artificial  being, 
and  their  participation  in  the  organization  might  give  rise  to 
questions  affecting  its  validity.  Partnerships,  equally  with  cor- 
porations are  excluded  under  the  terms  of  the  statute  as  corpora- 
tors, but  may  be  stockholders  of  a  bank  if  not  prohibited  by  the 
laws  of  the  State  in  which  the  bank  is  located. 

§  363.  Married  Women  As  Corporators. — Whether  a  married 
woman  can  be  a  corporator  will  depend  upon  the  law  of  the  State 
in  which  she  resides  and  where  the  bank  is  to  be  located.  If  by 
the  State  law  she  is  authorized  to  make  a  contract,  and  has  the 
capacity  to  bind  herself  to  all  the  liabilities  and  obligations  of  a 
shareholder,  there  is  no  reason  why  she  should  not  participate  in 
forming  the  corporation.  Evidence  of  her  right  should  accompany 
papers  executed. 

§  364.  Infants  As  Corporators. — An  infant — that  is,  a  person 
under  legal  age — should  never  be  allowed  to  become  a  corporator, 
for  his  contract  would  not  be  binding  and  he  could  repudiate  it 
upon  becoming  of  age. 

§  365.  Corporators — Action  by  Agent  or  Attorney.— There 
seems  to  be  no  reason  why  a  corporator  may  not  execute  the  papers 
by  an  agent  or  attorney.  In  the  case  of  the  organization  of  a  rail- 
road corporation,  it  was  said  by  the  Court  of  Appeals  of  New  York, 
that  the  instrument  of  incorporation  might  be  executed  by  a  duly 
authorized  agent.  (Matter  of  N.  Y.,  L.  E.  and  W,  R.  R.  Co.,  90 
1ST.  Y.,  12.)  There  is  nothing  in  the  National  banking  law  to  re- 
quire a  different  rule  in  the  organization  of  a  National  bank,  but 
this  procedure  is  not  recommended  and  it  is  thought  best  to  have 
the  corporators  execute  all  papers  personally. 

"Where  this  is  impossible  the  following  form  of  power  of  attor- 
ney may  be  used: 

Know  all  men  by  these  presents  that  I  — ■ — ,  of  ,  do 

hereby  appoint ,  of  ,  my  attorney,  for  me  and  in 


423 

my  name  to  sign  and  execute  all  papers  and  instruments  that  it  shall 
be  proper  and  necessary  for  the  corporators  of  the  National  banking 

association  to  be  located  in  the of ,  county  of ,  State 

of ,  and  to  be  known  as  the  ,  and  to  subscribe  for  

shares  in  the  original  capital  stock  of  the  said  — i — — ;  hereby  ratifying 
and  confirming  all  that  my  said  attorney  shall  lawfully  do  by  virtue 
hereof. 

In  witness  whereof  I  have  hereunto  set  my  hand  this day  of 

— ,  192—.  [Signature.] 

State  of , 


County  of  ,  ss: 

On  this  —  day  of  — ,  19 — ,  before  me,  a  notary  public  in  and  for  the 

State  and  county  aforesaid,  appeared  ,  known  to  me  to  be  the 

person  who  executed  the  foregoing  instrument,  and  acknowledged  that 
he  executed  the  same.  [Signature  of  notary.] 

[Seal  of  notary.] 

Such  a  power  if  used  should  be  filed  in  the  office  of  the  Comp- 
troller of  the  Currency  with  the  other  papers. 

§  366.  The  Subscription  Paper.— The  law  does  not  require  a 
preliminary  subscription  for  the  stock  of  the  proposed  bank, 
though  such  subscription  is  advisable,  and  is  frequently  the  means 
of  greatly  facilitating  the  organization.  By  it  the  persons  are 
brought  together  in  a  mutual  contract,  and  are  thus  enabled  to 
come  to  a  full  understanding  on  matters  preliminary  to  the  organ- 
ization of  the  bank,  about  which  there  may  be  great  difference  of 
opinion.  To  postpone  doing  so  until  the  articles  of  association 
are  presented  for  signature  to  the  various  persons  who  are  to  be- 
come corporators  might  cause  confusion  and  delay.  For  example, 
it  is  well  to  have  an  understanding  as  to  what  provisions  the  arti- 
cles of  association  shall  contain;  who  shall  be  named  as  the  first 
directors  of  the  bank;  where  the  banking  house  shall  be  located; 
the  exact  number  of  shares  each  person  interested  is  to  have,  and 
it  frequently  happens  that  persons  are  willing  to  become  share- 
holders only  upon  prescribed  conditions;  that  a  certain  man  shall 
be  president;  that  the  banking  house  shall  be  located  on  a  certain 
street,  etc.;  so  it  will  be  seen  that  the  chances  of  misunderstand- 
ings and  future  disagreements  are  very  materially  lessened  if  the 
conditions  are  plainly  set  forth  in  a  subscription  paper. 


424 

The  signing  of  the  subscription  paper  does  not  necessarily  con- 
stitute one  a  member  of  the  corporation  which  is  afterwards  formed ; 
and  should  the  other  subscribers  refuse  to  admit  him  to  participa- 
tion in  the  organization,  he  would  have  only  an  action  for  damages. 
But  when  requested  to  do  so  by  those  promoting  the  organization, 
each  subscriber  would  be  bound  to  join  in  the  execution  of  all  the 
instruments  necessary  that  the  corporators  should  execute  for  the 
formation  of  the  corporation.  Should  any  subscriber  refuse  to  exe- 
cute these  instruments,  and  his  refusal  have  the  effect  of  preventing 
an  organization,  or  greatly  delay  it,  a  court  of  competent  jurisdic- 
tion might  upon  petition  of  the  other  subscribers,  decree  specific 
performance.  (See  Lindley  on  Partnership,  p.  925,  and  cases 
there  cited.) 

We  earnestly  recommend  that  subscriptions  be  taken  at  a  prem- 
ium of  ten  or  twenty  per  cent,  to  cover  expenses  and  to  show  a  sur- 
plus in  opening.  This  often  avoids  impairment  of  capital  during 
the  first  year. 

Where  a  surplus  is  not  created  by  the  payment  of  a  premium  on 
the  stock,  it  is  recommended  that  no  dividends  be  paid  until  a  sub- 
stantial surplus  has  been  accumulated  from  the  earnings  of  the 
bank. 

Where  the  stock  is  sold  at  a  premium  of  20%  the  net  earnings 
may  be  distributed  without  carrying  any  part  thereof  to  surplus  as 
is  provided  by  Sec.  5199  U.  S.  E.  S. 

Form  op  Subscription  Paper. — 

We  whose  names  are  hereunto  signed  do  hereby  subscribe,  in  the 
proportions  hereinafter  set  opposite  our  respective  names,  for  the  stock 
of  a  National  banking  association  to  be  organized  under  the  laws  of 

the  United  States  with  a  capital  stock  of  thousand  dollars, 

divided  into  shares,  of  the  par  value  of  one  hundred  dollars 

each,  the  said  National  banking  association  to  be  located  in  the 

of  ,  State  of  ,  and  to  be  called  "The  ." 


Signatures.  |  Address.  |  Occupation.  |  Net   Financial  Worth  ]  Shares. 

A  shareholder  must  be  worth  at  least  double  the  amount  subscribed. 

The  law  requires  that  50  per  cent,  of  the  capital  stock  of  a  National 

bank  shall  be  paid  in  cash  and  permits  the  payment  of  the  additional 


425 

50  per  cent,  in  five  equal  monthly  installments,  but  there  would  appear 
to  be  no  objection  to  the  incorporation  in  the  subscription  contract 
of  a  provision  that  the  entire  amount  due  on  each  share  shall  be  paid 
at  the  call  of  the  directors. 

§  367.  Capital  Requirements. — The  minimum  capital  require- 
ments depend  upon  the  population  of  the  place,  and  are  as  fol- 
lows: 

$25,000  where  the  population  does  not  exceed  3,000;  $50,0G0  where 
the  population  does  not  exceed  6,000;  $100,000  where  the  population 
does  not  exceed  50,000;  $200,000  where  the  population  exceeds  50,- 
000. 

National  banks  organized  in  suburban  districts  included  within 
the  corporate  limits  of  a  city  must  have  the  amount  of  capital  re- 
quired by  law  for  a  bank  organizing  in  that  city. 

§  368.  Entire  Stock  to  Be  Taken  By  Bona  Fide  Subscribers. — 

In  some  of  the  States,  in  the  formation  of  corporations,  where  it  is 
not  definitely  determined  to  whom  the  shares  are  to  be  issued  and 
how  many  shares  to  each,  a  limited  number  of  persons  take  the 
entire  issue  for  subsequent  distribution;  but  this  method  is  not 
deemed  lawful  in  the  organization  of  a  National  bank.  The 
Comptroller  holds  that  every  share  shall  have  been  placed  when 
the  organization  certificate  is  executed,  in  order  that  the  certificate 
may  contain  the  name,  address  and  holdings  of  stock  of  every 
shareholder. 

§  369.  Professional  Promoters. —  The  exclusion  of  professional 
promoters  from  the  organization  is  required  by  the  Comptroller 
as  an  application  to  receive  his  approval  must  represent  a  local 
demand  for  banking  accomodations. 

§  370.  Temporary  Stock  Certificates. —  In  case  subscriptions  to 
stock  are  paid  in  installments,  temporary  certificates  may  be  issued 
and  the  amount  of  each  payment  credited  thereon.  When  all  in- 
stallments have  been  paid  the  temporary  certificates  should  be  sur- 
rendered and  cancelled  and  permanent  certificates  of  stock  issued 
in  lieu  thereof. 


426 


The  following  is  a  form  of  temporary  certificate  in  general  use : 


No. 


Tempobaby  Cebtificate. 


— shares. 


This  is  to  certify  that  is  entitled  to  —  shares  of  the 

capital  stock  of  the National  Bank  of ■ — ,  capital  $ — > — ,  and 

that  upon  payment  of  all  installments,  amounting  to  $ >,  and  sur- 
render of  this  temporary  certificate,  a  certificate  of  stock  will  be  is- 
sued. 

Witness  the  seal  and  the  signatures  of  the  president  and  cashier  of 
the  bank. 

Dated  ,  192—. 

The  — i — i —  National  Bank  of 

By ,  , 


Cashier. 


President. 


Payments  on  Account  of  Capital. 

paid 


First  installment, per  cent.,  amounti 

Second 



Third 



Fourth 

«            _____      <<                          ■< 

Fifth 

<f            _____      n                         tt 

Sixth 

ii                .          ii                         ii 

Assignment 

For  value  received  I  hereby  transfer  and  assign  to 
porary  certificate  and  hereby  appoint  and  constitute  - 


-,  192- 
-,  192- 
-,  192- 
-,  192- 
-,  192- 
-,  192- 


this  tem- 
my 


true  and  lawful  attorney  to  transfer  said  certificate,  with  full  power 
of  substitution   in   the   premises. 

Dated  at ,  this  day  of ,  192 — . 

Witness: . 


§  371.  Application  to  Comptroller  to  Organize. — When  the  cor- 
porators have  fixed  upon  a  name  for  the  bank,  the  Comptroller 
should  be  written  to  and  requested  to  reserve  the  desired  title.  The 
location  and  proposed  capital  should  be  stated.  If  capital  is  to 
be  less  than  $100,000,  the  approval  of  the  Secretary  of  the  Treas- 
ury is  required.     (Sec.  5138  R.  S.) 

We  will  be  glad  to  transmit  such  requests  and  reserve  title  for  the 
usual  15  days  during  which  formal  application  should  be  filed.  Our 
long  experience  and  familiarity  with  these  matters  is  often  of  material 
assistance. 


427 


The  following  formal  application  will  be  furnished  upon  request : 


Application  to  Organize  a  National  Bank. 


-,  192—. 


TO  THE  COMPTROLLER  OF  THE   CURRENCY, 

Washington. 

Sir:  We,  the  undersigned,  prospective  shareholders,  being  natural 
persons  and  of  lawful  age,  intend,  with  others,  to  organize  a  National 

banking  association,   under  the   title  of  "The  — ■ — i — /'   to   be 

located   at  ,    county   of   — > ,    State   of   ,    with 

capital  of  $ — ,  to  succeed  the bank  of > — .  Popu- 
lation,   . 

We  request  that  the  title  be  reserved  and  that  the  necessary  in- 
structions be  sent  to -,  who  is  an  actual  resident  of  the 

place  where  the  proposed  bank  is  to  be  located. 


Signatures  of  applicants- 


Residences. 


Business- 


Financial 

strength,  in 

figures. 


Shares  to  be 

subscribed 

for. 


The  signers  of  this  application  are  known  by  me  to  be  reputable 
citizens;  the  information  in  reference  to  their  business  and  financial 
standing  is  in  my  opinion  correct,  the  statement  as  to  population  au- 
thentic, and  I  am  of  the  belief  that  the  conditions  locally  are  such  as 
to  insure  success  if  the  bank  is  organized  and  properly  managed. 

,  Judge  of  Court. 

,  Postmaster. 

,  Mayor. 


READ  these  instructions   carefully. 

The  name  of  the  place  should  form  a  part  of  the  title,  thus,  "The 

First  National  Bank  of  A ,"  but  the  name  of  the  State  should 

not  be  included. 

Consideration  will  not  be  given  to  an  application  for  a  title,  in- 
cluding the  word  "First,"  if  a  National  bank  exists  at  the  given 
locality;  nor  tti  an  application  for  a  title  identical  with  that  of 
a  National  bank  heretofore  in  existence,  nor  to  one  materially  similar 
to  that  of  a  National,  State,  or  other  bank  existing  in  the  place. 


428 


The  application  must  be  signed  by  at  least  five  prospective  share* 
holders,  preferably  the  proposed  officers  or  directors,  and  should  be 
indorsed  by  three  prominent  persons,  judge  of  court,  postmaster,  and 
mayor,  or  other  public  officials. 

The  correspondent  should  be  a  resident  of  the  place  where  the  bank 
is  to  be  located,  a  prospective  shareholder,  and,  if  possible,  an  officer 
or  director  of  the  proposed  bank. 

It  is  not  necessary  for  the  applicants  to  subscribe  for  the  entire 
issue  of  stock.  Only  the  actual  number  of  shares  to  be  held  by  each 
should  be  stated,  and  each  applicant  should  be  worth  financially 
twice  the  value  of  the  stock  for  which  he  subscribes. 

The  following  shows  the  National,  State,  or  private  banks  with  which 
the  applicants  are,  or  have  been,  connected  either  as  officers  or  directors. 


Applicant. 


Institution. 


Position. 


Period. 


(Date) 


(Signed) 


*  Correspondent. 


*N.  B. — The  correspondent  is  requested  to  furnish,  as  early  as  pos- 
sible, a  list  of  the  prospective  officers  and  directors  of  the  proposed 
organization  and  a  statement  showing  their  previous  connection,  if 
any,  with  other  banking  institutions. 

Care  should  be  taken  in  executing  this  form.  All  the  informa- 
tion called  for  should  be  given  and  the  instructions  followed  to 
the  letter.  In  furnishing  a  list  of  prospective  officers  and  directors 
it  must  be  remembered  that  the  president  and  a  majority  of  the 
directors  should  be  residents  of  the  place  where  the  bank  is  located. 

Printed  headings  on  the  stationery  of  an  organizing  bank  should 
indicate  clearly  that  the  bank  is  "organizing."  The  banks  perma- 
nent letterhead  should  contain  the  charter  number  and  as  this 
cannot  be  obtained  prior  to  issuance  of  charter,  the  bank's  station- 
ery is  unavoidably  delayed. 

§  372.  Form  of  Title.— The  name  of  the  place  in  which  the 
bank  is  to  be  located  must  constitute  a  part  of  the  title.  If  the 
name  of  the  place  is  selected  as  the  distinguishing  part  of  the 


429 

title,  it  must  not  also  be  added.  Thus,  if  the  title  is  to  be,  "The 
Omaha  National  Bank,"  the  words  "of  Omaha"  must  not  be 
added.  The  addition  of  the  name  of  the  State  is  not  allowed. 
It  is  best  to  make  the  title  brief,  not  using  unnecessary  words, 
nor  a  long  name  or  compound  word  as  the  distinguishing  part. 

The  title  "The  First  national  Bank  of  "  will  not  be 

granted  in  case  a  National  bank  exists  in  the  place,  nor  will 
the  title  of  any  National  bank  before  existing,  nor  a  title  liable 
to  be  confounded  with  that  of  another  National  or  State  bank, 
nor  the  title  of  Second  National  Bank  where  such  title  would  be 
a  misnomer  on  account  of  the  existence  of  two  or  more  National 
banks  in  the  place. 

§  373.  Investigation  by  National  Bank  Examiner. —  When  an 
application  is  transmitted  it  should  be  accompanied  by  a  draft 
for  $100,  payable  to  the  order  of  the  Comptroller  of  the  Cur- 
rency, to  cover  the  expense  of  investigation.  Upon  receipt  of 
this  draft  the  chief  national-bank  examiner  for  the  district  will 
be  directed  to  detail  an  examiner  to  make  the  investigation,  the 
examiner  being  requested  to  arrange  with  the  local  correspondent 
in  the  case  as  to  the  date  when  the  investigation  is  to  be  made. 

In  making  this  investigation  the  examiner  is  instructed  to  give 
full  consideration  to  ail  factors  entering  into  the  proposition. 
Among  other  matters  to  be  considered  are;  first,  the  general 
character  and  experience  of  the  organizers  and  of  the  proposed 
officers  of  the  new  bank;  second,  the  adequacy  of  existing  bank- 
ing facilities  and  the  need  of  further  banking  capital;  third,  the 
outlook  for  the  growth  and  development  of  the  town  or  city  in 
which  the  bank  is  to  be  located ;  fourth,  the  methods  and  banking 
practices  of  the  existing  bank  or  banks,  the  interest  rates  which 
they  charge  to  customers,  and  the  character  of  the  service  which 
as  quasi-public  institutions  they  are  rendering  to  their  community ; 
fifth,  the  reasonable  prospects  for  success  of  the  new  bank  if 
efficiently  managed. 

In  every  case  where  there  is  a  protest,  the  examiner  is  directed 
to  see  and  personally  interview  those  for  and  against  the  proposi- 
tion. 


430 

In  addition  to  securing  a  report  from  the  examiner,  made  after 
a  personal  investigation,  the  Comptroller  obtains  a  report  from  the 
Federal  reserve  bank  of  the  district;  from  the  State  banking  de- 
partment, and  from  such  other  sources  as  he  may  deem  advisable. 

§  374.  Organization  Papers. —  When  the  application  to  organize 
has  been  approved  by  the  Comptroller,  he  forwards  to  the  appli- 
cants blank  organization  papers,  with  specific  instructions  for 
their  execution,  and  expects  the  organization  to  be  completed 
within  the  60  day's  for  which  title  has  been  reserved.  Extensions 
however,  are  granted  for  cause.  Written  forms  will  be  accepted 
only  in  exceptional  cases,  as  a  great  amount  of  labor  is  involved  in 
examining  papers  thus  prepared,  which  is  avoided  by  the  use  of 
printed  forms. 

The  organization  blanks  are  as  follows:  Articles  of  Associa- 
tion, Organization  Certificate,  Oaths  of  Directors,  Signatures  of 
Officers,  By-Laws,  Certificate  as  to  Payment  on  Capital  Stock, 
Order  for  Circulation. 

In  the  case  of  reorganization  a  Certificate  of  Directors  in  regard 
to  assets  purchased  from  the  old  bank  is  required,  and  if  a  con- 
version of  a  State  bank,  there  is  an  additional  form  for  share- 
holders to  authorize  conversion. 

The  execution  of  these  papers  is  a  very  simple  matter,  but  mis- 
takes are  very  frequently  made  through  carelessness.  For  example : 
the  Corporate  Title  is  not  inserted  exactly  as  approved  by  the 
Comptroller,  perhaps  abbreviated  or  name  of  State  added;  names 
of  persons  mispelled;  errors  made  in  jurat;  oaths  of  directors 
antedating  organization  certificate,  etc.  Care  should  be  taken  to 
prepare  the  papers  correctly,  so  as  to  avoid  the  delay  incident  to 
their  return  by  the  Comptroller  for  correction. 

We  will  gladly  examine  and  file  these  papers  with  the  Comptroller, 
and  our  long  experience  often  saves  delay  and  extra  work. 

§  375.  Articles  of  Association — Form. — This  is  the  first  instru- 
ment to  be  executed.  Sec.  5133  Revised  Statutes  provides  that 
the  Articles  "shall  specify  in  general  terms  the  object  for  which 
the  association  is  formed,  and  may  contain  any  other  provisions 


431 

not  inconsistent  with  law  which  the  association  may  see  fit  to 
adopt  for  the  regulation  of  its  business  and  conduct  of  its  affairs." 
The  following  is  the  form  furnished  by  the  Comptroller: 

ARTICLES   OF   ASSOCIATION. 

(Executed    in   duplicate.) 

For  the  purpose  of  organizing  an  association  to  carry  on  the  business 
of  banking  under  the  laws  of  the  United  States,  the  undersigned  sub- 
scribers for  the  stock  of  the  association  hereinafter  named  do  enter 
into  the  following  articles  of  association: 

First.    The  title  of  this  association  shall  be  "The  ■ ." 

Second.  The  place  where  its  banking  house  or  office  shall  be  located, 
and  its  operations  of  discount  and  deposit  carried  on,  and  its  general 
business  conducted,  shall  be  . 

Third.     The  board  of  directors  shall  consist  of  —  shareholders. 

The  first  meeting  of  the  shareholders  for  the  election  of  directors  shall 

be  held  at on  the ,  or  at  such  other  place  and  time  as  a 

majority  of  the  undersigned  shareholders  may  direct. 

Fourth.  The  regular  annual  meetings  of  the  shareholders  for  the 
election  of  directors  shall  be  held  at  the  banking  house  of  this  asso- 
ciation on  the  second  Tuesday  of  January  of  each  year;  but  if  no 
election  shall  be  held  on  that  day  it  may  be  held  on  any  other  day, 
according  to  the  provisions  of  Section  5149  of  the  Revised  Statutes  of 
the  United  States,  and  all  elections  shall  be  held  according  to  such 
regulations  as  may  be  prescribed  by  the  board  of  directors  not  incon- 
sistent with  the  provisions  of  the  National  banking  law  and  of  these 
articles. 

Fifth.    The  capital  stock  of  this  association  shall  be  dollars, 

divided  into  shares  of  one  hundred  dollars  each;*  but  the  capital  may, 
with  the  approval  of  the  Comptroller*  of  the  Currency,  be  increased  at 
any  time  by  shareholders  owning  two-thirds  of  the  stock,  according 
to  the  provisions  of  an  act  of  Congress  approved  May  1,  1886;  and 
in  case  of  the  increase  of  the  capital  of  the  association  each  share- 
holder shall  have  the  privilege  of  subscribing  for  such  number  of 
shares  of  the  proposed  increase  of  the  capital  stock  as  he  may  be 
entitled  to  according  to  the  number  of  shares  owned  by  him  before 
the  stock  is  increased. 

Sixth.  The  board  of  directors,  a  majority  of  whom  shall  be  a 
quorum  to  do  business,  shall  elect  one  of  its  members  president  of 
this  association,  who  shall  hold  his  office  (unless  he  shall  be  dis- 
qualified, or  be  sooner  removed  by  a  majority  vote  of  the  board)  for 
the  term  for  which  he  was  elected  a  director.  The  directors  shall 
have  power  to  elect  a  vice  president,  who  shall  also  be  a  member  of 
the  board  of  directors,  and  who  shall  be  authorized,  in  the  absence 


433 

or  inability  of  the  president  from  any  cause,  to  perform  all  acts  and 
duties  pertaining  to  the  office  of  president,  except  such  as  the  presi- 
dent only  is  authorized  by  law  to  perform,  and  to  elect  or  appoint  a 
cashier  and  such  other  officers  and  clerks  as  may  be  required  to 
transact  the  business  of  the  association;  to  fix  the  salaries  to  be 
paid  to  them,  and  continue  them  in  office,  or  to  dismiss  them  as,  in 
the  opinion  of  a  majority  of  the  board,  the  interest  of  the  associa- 
tion may  demand. 

The  directors  shall  have  power  to  define  the  duties  of  the  officers 
and  clerks  of  the  association,  to  require  bonds  from  them,  and  to  fix 
the  penalty  thereof;  to  regulate  the  manner  in  which  elections  of 
directors  shall  be  held,  and  to  appoint  judges  of  the  elections;  to 
make  all  by-laws  that  it  may  be  proper  for  them  to  make,  not  in- 
consistent with  the  law,  for  the  general  regulation  of  the  business 
of  the  association  and  the  management  of  its  affairs,  and  generally 
to  do  and  perform  all  acts  that  it  may  be  legal  for  a  board  of  directors 
to  do  and  perform  under  the  Revised  Statutes  aforesaid. 

Seventh.  This  association  shall  continue  fOr  the  period  of  twenty 
years  from  the  date  of  the  execution  of  its  organization  certificate, 
unless  sooner  placed  in  voluntary  liquidation  by  the  act  of  its  share- 
holders owning  at  least  two-thirds  of  its  stock,  or  otherwise  dissolved 
by  authority  of  law. 

Eighth.  These  articles  of  association  may  be  changed  or  amended 
at  any  time  by  shareholders  owning  a  majority  of  the  stock  of  the 
association,  in  any  manner  not  inconsistent  with  law;  and  the  board 
of  directors  or  any  three  shareholders  may  call  a  meeting  of  the 
shareholders  for  this  or  for  any  other  purpose,  not  inconsistent  with 
law,  by  publishing  notice  thereof  for  thirty  days  in  a  newspaper  pub- 
lished in  the  town,  city,  or  county  where  the  bank  is  located,  or  by 
mailing  to  each  shareholder  notice  in  writing  thirty  days  before  the 
time  fixed  for  the  meeting. 

In  witness  whereof  we  have  hereunto  set  our  hands  this  day 

of . 

(To  be  signed  by  at  least  five  natural  persons,  preferably  the  ap- 
plicants.) 


The  articles  may  be  varied  to  meet  the  views  of  the  corporators, 
and  any  provisions  may  be  inserted  which  are  not  inconsistent 
with  the  National  banking  laws,  but,  unless  conditions  specially 


433 

require,  it  is  advisable  to  conform  to  the  form  provided  by  the 
Comptroller  of  the  Currency. 

It  will  be  noted  that  this  form  of  articles  of  association  provides 
for  the  annual  meeting  of  shareholders  on  the  second  Tuesday  of 
January,  but  any  day  of  the  month  may  be  selected,  as  the  law 
(Sec.  5145)  provides  only  that  the  meeting  be  held  in  January. 

§  376.  Signing  of  Articles.—  It  is  unnecessary  for  more  than 
five  of  the  subscribers  to  the  capital  stock  to  act  as  incorporators 
and  sign  the  articles  of  association.  Those  who  sign  the  articles 
must  also  sign  and  acknowledge  the  organization  certificate.  In 
executing  the  organization  papers,  each  person  should  sign  his 
Christian  name  and  surname  in  full,  as  is  usually  done  in  the 
execution  of  deeds  and  other  legal  instruments,  and  must  sign 
his  name  the  same  way  in  every  instance. 

§  377.  Executed  in  Duplicate. — The  law  requires  that  a  copy 
of  the  articles  of  association  shall  be  filed  in  the  office  of  the 
Comptroller  of  the  Currency.  It  often  happens  that  the  original 
articles  in  the  possession  of  the  bank  are  lost  or  destroyed.  For 
this  reason  it  has  become  the  practice  to  execute  them  as  well  as 
the  organization  certificate,  in  duplicate,  and  to  file  with  the 
Comptroller  one  of  these  instead  of  a  copy. 

§  378.  Naming  Directors  in  Articles.—  Instead  of  providing,  as 
in  the  form  given  (Article  3),  for  a  meeting  of  shareholders  to 
elect  directors,  the  incorporators  may  designate,  if  they  choose,  in 
the  articles  the  persons  who  shall  constitute  the  first  board  of 
directors.  In  this  event  the  third  article  in  the  preceding  form 
should  be  made  to  read  as  follows: 


The  board  of  directors  shall  consist  of shareholders,  and  the 

following  persons  (here  insert  their  names)  are  hereby  appointed  di- 
rectors of  this  association,  to  hold  their  offices  as  such  until  the  reg- 
ular annual  election  takes  place,  pursuant  to  the  fourth  article  of 
these  articles  of  association,  and  until  their  successors  are  chosen  and 
have  qualified. 
28 


434 

§  379.  Sliding  Scale  of  Directors. — The  third  section,  if  desired, 
may  be  made  to  provide  for  what  is  termed  a  sliding  scale  instead 
of  a  fixed  number  of  directors;  in  other  words,  a  minimum  and 
maximum  number  of  directors,  in  which  event  the  section  should 
read  as  follows: 

The  board  of  directors  shall  consist  of  not  less  than  (insert  mini- 
mum number)  nor  more  than  (insert  maximum  number)  shareholders; 
and  the  following  persons  (here  insert  their  names)  are  hereby  ap- 
pointed directors  of  this  association,  to  hold  their  offices  as  such  until 
the  regular  annual  election  takes  place,  pursuant  tc  the  fourth  article 
of  these  articles  of  association,  and  until  their  successors  are  chosen 
and  have  qualified.  The  number  of  directors  elected  at  each  annual 
meeting  shall  constitute  the  board  for  the  year,  all  vacancies  to  be 
filled  in  accordance  with  the  provisions  of  Section  5148. 

The  advantage  of  a  sliding  scale  is  that  the  shareholders  are 
enabled  to  elect  annually  any  number  of  directors  within  the 
limits  of  the  scale  without  amending  the  articles  of  association. 
If  a  vacancy  occurs  after  the  shareholders  have  elected  a  certain 
number  of  directors  for  the  year  it  must  be  rilled  just  as  though 
the  articles  called  for  a  fixed  number  of  directors. 

§  380.  Qualification  of  Directors. — Section  5146,  E.  S.,  pro- 
vides that  a  director  of  a  National  bank  must  be  a  citizen  of  the 
United  States,  and  at  least  three-fourths  of  the  Board  must  have 
resided  in  the  State  or  Territory  where  the  bank  is  located  for 
the  year  just  preceding  their  election,  and  must  be  resident  there- 
in while  directors;  (Note,  this  requires  four  of  five,  etc.)  The 
Comptroller  further  requires  that  the  President  and  a  majority 
be  residents  of  the  place.  Each  director  also  must  own  and  free 
from  pledge  at  least  five  shares  of  stock  if  capital  is  only  $25,000, 
and  ten  shares  if  more  than  that.  He  need  pay  for  this  stock 
only  as  the  regular  payments  on  the  stock  of  the  bank  are  re- 
quired. 

§  381.  Election  of  Directors. —  Section  5145,  E.  S.,  provides 
that  a  National  bank  shall  have  at  least  five  directors,  and  they  may 
be  either  elected  at  a  shareholders'  meeting,  to  be  held  before  the 


435 

bank  is  chartered,  or  appointed  in  the  articles.  It  is  required 
that  the  annual  election  be  held  in  January,  even  though  a  bank  is 
organized  and  directors  elected  or  appointed  only  shortly  before 
that  time,  and  though  no  change  in  the  Directory  may  be  desired. 
Cumulative  voting  at  shareholders'  meetings  is  not  permissible. 

§  382.  Number  of  Directors. — In  fixing  the  number  of  directors, 
it  is  well,  as  before  stated,  to  adopt  a  sliding  scale  in  the  articles 
of  association,  to  avoid  the  necessity  of  calling  a  special  meeting  of 
stockholders  to  change  the  articles,  in  case  it  is  deemed  expedient  at 
the  annual  meeting  to  increase  or  decrease  the  number.  The  form 
is  given  on  a  preceding  page.  We  would  suggest  a  board  of  at 
least  seven  members — as  the  law  requires  that  the  reports  of  condi- 
tion, made  five  times  during  the  year,  shall  be  attested  by  not  less 
than  three  directors;  so  that  with  a  smaller  board  it  will  be  seen 
the  liberty  of  the  members  to  be  absent  from  the  place  is  curtailed. 

§  383.  Provision  for  Increasing  Capital  Stock. — It  was  origin- 
ally required  to  provide  in  the  articles  of  association  for  increase  of 
the  capital  stock  (Section  5142,  Eevised  Statutes),  but  such  a 
provision  is  no  longer  necessary,  for  the  Act  of  May  1,  1886,  au- 
thorizes shareholders  owning  two-thirds  of  the  shares,  with  the  ap- 
proval of  the  Comptroller,  to  increase  the  capital  stock  at  any 
time  and  to  any  amount. 

§  384.  Provision  for  lien  on  Stock.— Formerly  it  appears  to 
have  been  not  unusual,  for  the  persons  forming  an  association,  to 
incorporate  in  either  the  articles  of  association  or  the  by-laws,  and 
in  stock  certificates,  a  provision  to  the  effect  that  no  shareholder, 
when  indebted,  either  directly  or  indirectly,  to  the  bank,  could 
transfer  his  stock  without  the  consent  of  the  directors.  This  is  a 
very  common  provision  in  the  articles  of  association  and  by-laws 
of  other  than  National  banks  and  of  moneyed  corporations  gen- 
erally, and  is,  no  doubt,  an  excellent  one  where  the  policy  of*  the 
law  admits  of  it.  But  the  Supreme  Court  of  the  United  States 
has  held  that  any  such  regulation  adopted  by  a  National  bank  is 
void,  because  the  bank  would  thus  acquire  an  interest  in  its  own 
stock  in  violation  of  Section  5201,  Revised  Statutes.  (Bank  v. 
Lanier,  11  Wall.,  3G9.) 


436 

§  385.  Organization  Certificate — Form.—  The  next  step  is  to 
execute  an  organization  certificate.  This  should  be  done  either  at 
the  same  time  or  subsequent  to  the  execution  of  the  articles  of 
association.  The  provisions  to  be  made  in  this  certificate  are 
specially  set  forth  in  the  statute  (Section  5134,  Revised  Statutes), 
viz.: 

First.  The  name  assumed  by  such  association,  which  name  shall 
be  subject  to  the  approval  of  the  Comptroller  of  the  Currency. 

Second.  The  place  where  its  operations  of  discount  and  deposit 
are  to  be  carried  on,  designating  the  State,  Territory,  or  District 
and  the  particular  county  and  city,  town,  or  village. 

Third.  The  amount  of  capital  stock  and  the  number  of  shares 
into  which  the  same  is  to  be  divided. 

Fourth.  The  names  and  places  of  residence  of  the  shareholders 
and  the  number  of  shares  held  by  each  of  them. 

Fifth.  The  fact  that  the  certificate  is  made  to  enable  such  per- 
sons to  avail  themselves  of  the  advantages  of  the  National  Bank 
Act. 

Every  one  of  these  provisions  must  be  stated  clearly  and  de- 
finitely in  the  certificate,  but  nothing  else  should  be  included  in  it. 

The  place  where  its  business  is  to  be  carried  on  refers  to  the 
town  or  city  and  not  to  the  particular  building  or  street  number. 

FORM    OF    ORGANIZATION    CERTIFICATE. 

(Executed   in    duplicate.) 

We,  the  undersigned,  whose  names  are  specified  in  article  fourth  of 
this  certificate  having  associated  ourselves  for  the  purpose  of  organiz- 
ing an  association  for  carrying  on  the  business  of  banking,  under  the 
laws  of  the  United  States,  do  make  and  execute  the  following  organiza- 
tion certificate: 

First.    The  title  of  the  association  shall  bei  "The ." 


Second.    The  said  association  shall  be  located  in  the of 


county  of ,  and  State  of  — ,  where  its  operations  of  discount 

and  deposit  are  to  be  carried  on. 

Third.    The  capital  stock  of  this  association  shall  be  dollars 

($ ),  and  shall   be  divided   into  < —  shares  of  one  hundred 

dollars  each. 

Fourth.  The  name,  financial  worth— net,  and  the  residence  of  each 
shareholder  of  this  association,  with  the  number  of  shares  held,  are  as 
follows: 


437 


Name 


Financial  worth — net 


Residence 


No.  of  shares 


Note. — The  names,  etc.,  of  all  the  shareholders  must  be  given. 

Fifth.  This  certificate  is  made  in  order  that  we  may  avail  ourselves 
of  the  advantages  of  the  aforesaid  laws  of  the  United  States. 

In  witness  whereof  we  have  hereunto  set  our  hands  this day 

of  . 

(To  be  signed  and  acknowledged  by  those  who  have  signed  the  ar- 
ticles of  association.) 


(Acknowledgment  must  be   made   before  judge   of  court  or  notary 
public  and  authenticated  by  the  seal  of  such  court  or  notary.) 

State  of , 

County  of ss: 


Before  the  undersigned,  a 


of 


personally  appeared 


,  to  me  well  known,  who  severally  acknowledged  that  they 

executed  the  foregoing  certificate  for  the  purposes  therein  mentioned. 
Witness  my  hand  and  seal  of  office  this —  day  of . 

OFFICIAL   SEAL  OF    OFFICER.  i . 


§  386.  Who  May  Be  Shareholders.—  If  any  shares  are  listed 
in  the  name  of  an  Executor,  Guardian  or  Trustee,  the  estate,  party 
or  parties  represented  also  must  be  stated,  with  address  and  amount 
held  for  each,  evidence  of  Trusteeship,  and  authority  to  subscribe. 
An  Administrator  has  no  authority  to  subscribe  for  stock,  as  his 
duty  is  merely  to  close  up  the  estate  and  he  has  no  authority  to 
make  investments. 

Stock  subscriptions  should  not  be  taken  in  the  name  of  an  estate. 
If  the  heirs  subscribe  it  should  be  in  their  individual  names.  No 
subscriptions  should  be  received  in  the  name  of  any  State,  county, 
township  or  municipality. 

For  shares  listed  in  the  name  of  an  Order,  or  Society  evidence  is 


438 

required  of  authority  under  its  Charter  or  articles  and  that  the 
Order  is  responsible  financially  and  legally  in  case  of  assessment. 

§  387.  Signing  and  Acknowledgment. — The  persons  signing  the 
articles  of  association  must  also  sign  the  organization  certificate 
(Section  5134,  Revised  Statutes),  and,  in  addition,  each  person 
signing  such  certificate  is  required  to  acknowledge  his  signature 
thereto  before  a  notary  public  or  a  judge  of  some  court  of  record. 
(Section  5135,  Revised  Statutes.)  In  acknowledging  signatures 
see  that  names  are  properly  spelled  if  inserted  by  notary  or  person 
other  than  incorporators.  The  acknowledgment  must  be  made  be- 
fore one  of  the  officers  specified  above,  but  before  no  other.  The 
acknowledgment  can  not  be  taken  by  the  clerk  of  the  court. 

The  fourth  subdivision  of  the  organization  certificate  should 
give  the  name,  etc.,  of  each  subscriber,  but  signatures  are  not  de- 
sired here  and  the  names  should  be  typewritten  if  possible. 

§  388.  Affixing  the  Seal.—  The  acknowledgment  must  be  au- 
thenticated by  the  seal  of  the  notary  or  court.  This  requirement 
is  not  dispensed  with  by  any  State  law,  that  notaries  are  not  re- 
quired to  have  seals,  and  no  certificate  from  a  State  officer  or 
other  evidence,  that  the  attesting  officer  is  a  notary  public  and 
qualified  to  take  acknowledgments,  will  answer  in  place  of  a  seal. 
The  seal  of  the  court  may,  of  course,  be  affixed  by  the  clerk  of  the 
court,  but  it  must  not  be  understood  because  the  clerk  may  affix 
the  seal  that  the  acknowledgment  may  be  taken  by  him. 

§  389.  Execution  of  Organization  Certificate. —  The  organiza- 
tion certificate  must  be  signed  by  the  same  persons  who  execute  the 
Articles  of  Association;  others  also  may  sign  if  for  any  special 
reason  their  signatures  are  desired,  but  they  must  be  subscribers 
to  the  stock  of  the  proposed  bank,  and  it  is  usually  found  that 
complications  arise  from  adding  other  signatures. 

The  names  of  those  who  sign  the  application  for  permission  to 
organize  the  bank  must  appear  in  the  organization  certificate  as 
corporators  or  at  least  as  shareholders,  otherwise  waiver  of  right 
to  participate  in  the  organization  of  any  one  or  more  such  appli- 


439 

cants,  not  participating,  must  be  furnished  to  the  Comptroller.  In 
the  event  that  less  than  a  majority  of  the  applicants  are  parties 
to  the  organization  either  as  corporators  or  stockholders,  the  Comp- 
troller will  not  permit  the  organization  to  proceed  until  waivers 
are  submitted  and  satisfactory  information  furnished  as  to  the 
character  and  financial  standing  of  the  successors  to  the  non- 
participating  applicants. 

§  390.  Filing  of  Organization  Papers. — It  is  customary  for 
parties  to  execute  all  papers  at  the  same  time  and  rorward  all 
together  to  the  Comptroller;  but  if  this  cannot  be  done  and  there 
is  occasion  to  become  a  body  corporate  promptly  in  order  to  take 
legal  action  on  some  matter,  the  execution  and  filing  of  the 
Articles  and  Organization  Certificate  will  be  sufficient  for  the  pur- 
pose. (Sec.  5136,  E.  S.)  This  however,  should  not  be  done 
until  after  the  Comptroller  has  approved  the  application  to  organ- 
ize. The  duplicate  set  of  papers  should  not  be  sent  to  the  Comp- 
troller, but  filed  with  the  bank's  records,  and  be  available  for  in- 
spection by  the  Bank  Examiner. 

§  391.  When  Association  a  Body  Corporate. — When  the  articles 
of  association  and  organization  certificate  have  been  executed  and 
filed  with  the  Comptroller,  the  association  can  then  enter  into  con- 
tracts as  a  corporation,  call  for  payments  upon  capital  stock  and 
transact  in  its  corporate  name  and  capacity  any  business  inciden- 
tal and  necessarily  preliminary  to  beginning  the  banking  business. 
No  other  business,  however,  can  be  transacted  until  receipt  of 
telegram  from  the  Comptroller  that  he  has  issued  charter.  (Sec. 
5136,  E.  S.)  (McCormick  v.  Market  National  Bank,  165  IT.  S., 
538.) 

The  lease  or  purchase  of  a  banking  house  may  not  be  contracted 
for  until  the  bank  has  been  fully  organized  and  chartered,  never- 
theless the  parties  interested  may  secure  an  option,  and  thus  hold 
the  property  until  the  lease  or  purchase  can  be  legally  made.  The 
Comptroller  should  be  promptly  advised  of  the  date  on  which  the 
bank  begins  business. 

§  392.  Oath  of  Directors.—  The  articles  of  association  and  or- 
ganization certificate  having  been  executed,  the  directors  appointed 


440 

in  the  articles  or  elected  by  the  shareholders  should  then  take  the 
oath  required  by  Sec.  5147,  R.  S.  This  may  be  taken  singly  or 
jointly  as  is  most  convenient.  They  must  not  antedate  the  ex- 
ecution of  the  articles  and  organization  certificate.  They  should 
be  administered  by  an  officer  having  an  official  seal,  and  promptly 
sent  to  the  Comptroller.  If  a  director  appointed  or  elected  fails 
to  take  the  oath  required,  in  a  reasonable  length  of  time,  the  Board 
may  declare  his  place  vacant  and  elect  a  new  member. 

Every  director  must  own  in  his  own  right  at  least  ten  shares 
of  stock,  unless  the  capital  is  $25,000,  in  which  case  he  must 
own  in  his  own  right  at  least  five  shares. 

Blank  forms  for  directors'  oaths  are  furnished  by  the  Comptrol- 
ler, but  written  or  typewritten  oaths  if  in  legal  form  may  be 
accepted. 

Form  of  Oath  of  Dibectob. — 

State  of , 

County  of  ,  ss: 

I,  the  undersigned,  director  of  The  ,  located  at  — ! ,  being 

a  citizen  of  the  United  States,  and  resident  of  the  State  of ' — ,  do 

solemnly  swear  (affirm)  that  I  will,  so  far  as  the  duty  devolves  on 
me,  diligently  and  honestly  administer  the  affairs  of  said  association; 
that  I  will  not  knowingly  violate,  or  willing  permit  to  be  violated, 
any  of  the  provisions  of  the  statutes  of  the  United  States  under  which 
this  association  has  been  organized;  and  that  I  am  the  owner  in  good 
faith  and  in  my  own  right,  of  the  number  of  shares  of  stock  required 
by  said  statutes,  subscribed  by  me  or  standing  in  my  name  on  the 
books  of  the  said  association;  and  that  tbe  same  is  not  hypothecated 
or  in  any  way  pledged  as  security  for  any  loan  or  debt. 


Subscribed  and  sworn  (affirmed)  to  before  the  undersigned  this 

day  of ,  19&— . 

[official  seal  of  offices.]  , 

Notary  Public. 

Note. — Each  director  when  elected  must  take  oath  of  office,  and,  un- 
der Section  5147,  U.  S.  R.  S.,  the  oath  should  be  transmitted  to  the 
Comptroller  of  the  Currency  immediately  after  the  election.  If  the  of- 
ficer administering  the  oath  has  no  seal,  a  certificate  of  the  proper 
State,  county,  or  court  official,  to  the  effect  that  such  officer  is  author- 
ized to  take  acknowledgments,  must  be  attached. 


441 

In  case  two  or  more  directors  qualify  jointly  the  following 
form  should  be  used : 

Form  of  Joint  Oath  of  Directors. — i 


State  of ; 

County  of ,  ss: 

We,   the   undersigned,   directors  of  The  ■,   located   at 


being  citizens  of  the  United  States,  and  all  residents  of  the  State  of 

1 — ,  do,  each  for  himself,  and  not  one  for  the  other_solemnly  swear 

(affirm)  that  we  will  severally,  so  far  as  the  duty  devolves  on  us, 
diligently  and  honestly  administer  the  affairs  of  said  association;  and 
that  we  will  not  knowingly  violate,  or  willingly  permit  to  be  violated, 
any  of  the  provisions  of  the  Statutes  of  the  United  States  under 
which  said  association  has  been  organized;  and  each,  for  himself, 
does  solemnly  swear  (affirm)  that  he  is  the  owner  in  good  faith,  and 
in  his  own  right,  of  the  number  of  shares  of  stock  required  by  said 
statutes,  subscribed  by  him  or  standing  in  his  name  on  the  books  of 
the  said  association;  and  that  the  same  is  not  hypothecated,  or  in 
any  way  pledged  as  security  for  any  loan  or  debt. 


Signature 


Signature 


Subscribed  and  sworn  (affirmed)  to  before  the  undersigned  this  ■ 

day  of ,  19—. 

[official  seal  of  officer.]  1 , 

Notary  Public. 

At  least  three-fourths  of  the  directors  must  have  resided  in  the 
State  in  which  the  bank  is  located  for  at  least  one  year  immedi- 
ately preceeding  their  election  and  must  reside  therein  during 
their  continuance  in  office. 

§  393.  Official  Signatures.— The  Comptroller  requires  that  the 
official  signatures  of  the  officers  of  the  bank  shall  be  furnished 
with  the  organization  papers,  and  as  soon  as  the  directors  have 
made  payment  of  at  least  50%  on  the  requisite  number  of  shares 


442 


and  have  taken  oath,  the  officers  should  be  elected  to  avoid  any 
delay  in  the  execution  of  papers  of  the  association  requiring  their 
signatures. 

The  seal  of  the  bank  is  required  to  attest  the  signatures;  yet, 
if  it  has  not  been  made,  the  signatures  should  be  forwarded,  and 
later  the  Comptroller  will  send  another  blank  for  execution  with 
seal. 

This  paper  must  not  antedate  the  Oaths  of  Directors.  The 
form  is  as  follows: 


OFFICIAL  SIGNATURES  OF  OFFICEES  OF  THE 


-,  LOCATED  AT 


-,  IN  THE  STATE  OF 


Office 


Original 
signatures 


Date  of  election  or 
appointment 


Names  of  predecessor 


President 
Vice-President 
Vice-President 
Cashier 
Assistant  Cashier 


[SEAL   OF  BANK.] 


IMPORTANT. 


The  following  instructions  should  be  observed  to  avoid  return  of 
paper  for  correction:  (1)  Insert  title  and  place  of  location  of  bank. 
(2)  Give  the  signatures  of  officers,  with  date  of  election  or  appoint- 
ment. (3)  In  case  of  a  vacancy,  the  word  "None"  should  appear  in 
the  space  for  the  signature  of  the  officer.  (4)  Affix  seal  of  bank  in 
the  place  designated.  (5)  The  signatures  of  all  of  the  officers,  with 
date  of  election  or  appointment  of  each,  and  name  of  predecessor, 
are  required. 


§  394.  By-laws. —  The  Comptroller  requires  that  a  copy  of  By- 
Laws  adopted  be  filed  with  Organization  Papers,  and  that  they 
provide  for  at  least  a  monthly  meeting  of  Directors,  and  that  the 
action  of  the  Discount  Committee  shall  be  approved  or  disap- 
proved by  the  Board  and  a  record  made  in  the  Minute  Book.  See 
next  chapter  for  form  of  by-laws  and  instructions. 

§  395.  Payment  on  Stock. —  Section  5168,  E.  S.,  requires  that 
at  least  fifty  per  cent,  of  the  capital  stock  shall  be  paid  in  and 


443 

certified  to  the  Comptroller  before  a  National  bank  can  be  char- 
tered. The  law  is  construed  by  the  Comptroller  as  requiring  pro 
rata  payments  on  the  first  (fifty  per  cent.)  instalment  and  sub- 
sequent instalments  of  capital  by  each  and  every  shareholder  listed 
in  the  organization  certificate  or  by  his  assignee.  Payments  must 
be  made  in  cash  and  not  in  assets  of  another  bank,  promissory 
notes,  or  other  evidences  of  debt.  The  directors  may  call  for 
the  payment  of  50  per  cent,  of  the  capital  stock  at  any  time,  unless 
the  stock  has  been  taken  on  some  agreement  to  the  contrarj^.  Of 
the  unpaid  balance  at  least  10  per  cent,  must  be  paid  each  month, 
beginning  one  month  from  the  date  of  the  issue  of  charter.  This 
section  merely  prescribes  the  time  within  which  the  capital  must 
be  paid  in.  The  second  and  subsequent  payments  of  course  are 
not  restricted  to  10  per  cent,  each,  as  the  capital  stock  may  be 
paid  if  desired  in  larger  amounts  and  in  advance  of  the  time 
required  by  law. 

It  is  suggested  that  the  subscribers  authorize  the  directors  to 
call  for  any  or  all  payments  of  stock  at  any  time  that  they  may 
deem  best. 

§  396.  Book  Entry  of  Payments  on  Subscriptions. —  Payments 
on  subscriptions  to  capital  stock  should  not  be  carried  to  stock 
account,  nor  entered  in  reports  of  condition  to  the  Comptroller  as 
capital  stock  until  these  payments  are  certified  to  the  Comptroller. 
Prior  thereto  they  should  be  credited  to  shareholders  in  a  separate 
account  and  entered  in  the  reports  to  the  Comptroller  under  head- 
ing "Liabilities  other  than  those  stated"  or  "capital  paid  in,  not 
certified." 

§  397.  Certificate  of  First  Payment  on  Stock — Form. —  When 
at  least  fifty  per  cent,  of  the  capital  stock  has  been  paid  in  it  is 
required  by  Section  5168,  Revised  Statutes,  that  this  be  certified 
to  the  Comptroller  by  the  president  or  cashier  and  a  majority  of 
the  directors  of  the  bank.  The  certificate  should  cover  all  amounts 
paid  in  on  capital  but  should  not  include  payments  on  surplus. 

The  form  of  such  certificate  is  as  follows : 


444 


CERTIFICATE    OF    PAYMENT   OF   FIRST    INSTALLMENT    OF    CAPITAL    STOCK    AND 
COMPLIANCE   WITH  LEGAL  REQUIREMENTS. 

The  undersigned  officers  and  directors  of  The —  ■    ,  located 

at ,  now  organizing  under  the  provisions  of  the  Revised  Statutes 

of  the  United  States  authorizing  the  organization  of  National  banking 
associations,  do  hereby  certify  that  of  the  authorized  capital  stock 

of  $ there  has  been  paid  into  said  bank  in  cash,  as  permanent 

capital,  $ — ,  exclusive  of  any  payments  on  surplus,  and  that  no 

part  of  this  sum  is  represented  by  promissory  notes  or  other  evidences 
of  debt;  and  that  each  shareholder  has  individually  paid  in  cash  fifty 
per  cent,  of  his  stock  subscription;  also,  that  the  name  and  place  of 
residence  of  each  director,  and  the  amount  of  stock  individually  owned 
in  good  faith,  are  as  follows: 


Name  of  director* 


Place  of  residence 
(Town  or  city  and  State) 


Number  of 
shares  of  stock 


*The  names,  etc.,  of  all  the  directors  of  the  association  must  appear 
on  this  page.  A  majority  of  the  directors,  exclusive  of  the  president 
or  cashier,  must  sign  on  the  following  page  and  make  acknowledgment. 

It  is  further  certified  that  the  association  has  in  good  faith  compiled 
with  all  of  the  provisions  that  are  required  to  be  complied  with  before 
receiving  authority  to  commence  the  business  of  banking. 


Directors. 


State  of- 


County  of 


— ,  SS'. 
Before  the  undersigned,  a  ■ 


of 


President,  or  Cashier. 


personally  appeared  the 


above-named  directors  and  other  officers  of  the  aforesaid  National  bank, 
and  made  oath  that  the  foregoing  certificate  and  the  matters  and 
things  therein  set  forth  are  true,  to  the  best  of  their  knowledge  and 
belief. 


445 

Witness  my  hand  and  seal  of  office  this day  of ,  192 — . 

[official  seal  of  officek.]  < , 

It  will  also  be  necessary  to  send  to  the  Comptroller  a  statement 
showing  the  total  amount  collected  on  stock  subscriptions.  The 
difference  between  this  amount  and  the  expenditures  in  connection 
with  the  organization  should  be  deposited  with  a  disinterested  bank, 
and  the  president  or  cashier  of  the  depositary  bank  requested  to 
certify  to  the  Comptroller  the  amount  on  deposit  to  the  credit  of  the 
organizing  bank.  The  depositary  bank  should  also  be  requested 
to  advise  the  Comptroller  whether  any  loan  was  made  to  any  of  the 
officers,  directors,  or  stockholders  of  the  new  institution,  and,  if 
so,  on  what  security. 

§  398.  Payment  of  Deferred  Installments  on  Capital.—  The  five 
remaining  installments  must  also  be  paid  in  money  and  certified 
to  the  Comptroller  by  the  president  or  cashier,  under  seal  of  the 
bank.  Installments  are  due  monthly  from  the  date  of  the  issu- 
ance of  the  Comptroller's  certificate  of  authority  to  commence 
business.     (Sec.  5140.) 

The  form  of  installment  certificate  is  as  follows: 

certificate  of  payment  of  capital  stock. 

,  192—. 

To  the  Comptroller  of  the  Currency, 

Washington,  D.  C. 

Sir:  It  is  hereby  certified  that  the installment,  amounting  to 

■    ■      dollars,  has  been  paid  in  cash  on  account  of  the  capital 

stock  of  The — ,  located  at ■ — ,  the  certification  of 

payments  to  date  being  as  follows: 

First  installment  (at  organization),  % — . 

Second  installment,  $ . 

Third  installment,  $ . 

Fotirth  installment,  % . 

Fifth  installment,  $ — . 

Sixth  installment,  $ 1 — . 

Total,  $ . 

Cashier. 


44G 


State  of , 

County  of  ,  ss: 

Subscribed  and  sworn  to  this  — i day  of  ,  192 — . 

[official  seal  of  officer.] 


Notary  Public. 

Note. — The  second  and  subsequent  payments  need  not  be  restricted 
to  10  per  cent,  each,  as  the  capital  stock  of  the  bank  may  be  paid,  if 
desired,  in  advance  of  the  time  required  by  law.  Do  not  include  in 
certificates  a  fraction  of  a  dollar  or  any  payments  on  surplus. 

No  payments  on  account  of  subscriptions  to  the  capital  stock  should 
be  carried  to  stock  account,  or  entered  in  reports  of  condition  as 
capital  stock,  until  date  of  certification  to  the  Comptroller.  Pending 
such  certification  payments  should  be  carried  in  a  separate  account 
to  the  credit  of  shareholders  and  entered  in  reports  to  the  Comptroller 
as  "Liabilities  other  than  those  stated." 

For  the  legal  method  of  enforcing  the  payment  of  subscriptions 
to  capital  stock  see  Section  5141,  U.  S.  E.  S. 

§  399.  Deposit  of  Bonds. — Under  Section  17  of  the  Federal 
Beserve  Act,  as  amended  by  the  Act  of  June  21,  1917,  it  is  no 
longer  compulsory  for  a  National  bank  to  deposit  bonds  with  the 
Treasurer  of  the  United  States  before  being  authorized  to  com- 
mence business. 

But  if  a  bank  desires  to  issue  circulating  notes,  United  States 
registered  bonds  of  designated  issues,  must  be  delivered  to  the 
Treasury  for  transfer  to  and  deposit  with  the  Treasurer  of  the 
United  States  in  trust  for  the  association  to  the  account  of  which 
they  are  to  be  credited.    See  Chapter  V  on  Bonds  and  Circulation. 

Coupon  bonds  can  be  exchanged  for  registered  bonds  by  send- 
ing them  to  the  Treasury  with  a  request  that  they  be  exchanged 
and  that  the  registered  bonds  be  issued  to  and  deposited  with  the 
Treasurer  of  the  United  States  in  trust  for  the  Association  in- 
terested. 

The  Comptroller  of  the  Currency  will  authorize  the  payment  of 
interest  on  bonds  to  the  bank  depositing  them,  and  the  Treasurer 
of  the  United  States  will  pay  the  interest  by  check,  to  the  order 
of  the  bank,  payable  at  the  office  of  any  United  States  Assistant 
Treasurer  or  at  any  United  States  Depository. 


447 

When  a  National  bank  becomes  a  government  depository  proper 
bonds  must  also  be  deposited  with  the  Treasurer  of  the  United 
States  as  security  for  the  public  money. 

§  400.  The  Circulation  Privilege. —  Every  National  bank  en- 
joys the  privilege  of  issuing,  at  its  pleasure,  its  own  bank  notes. 
However,  the  maximum  amount  which  it  may  issue  cannot  exceed 
the  amount  of  its  paid-in  capital  stock. 

In  addition  to  the  advantage  of  distributing  its  distinctive  cur- 
rency within  its  business  territory,  the  maintenance  of  a  circula- 
tion account  yields  to  the  issuing  bank  an  undoubted  profit  of 
about  1%  more  than  can  be  derived  by  merely  lending  out  the 
net  cost  of  the  bonds  that  must  be  deposited  with  the  Treasury. 

Upon  purchasing  and  depositing  with  the  Treasury  Depart- 
ment acceptable  bonds,  the  bank  will  thereupon  receive  circulat- 
ing notes  in  an  amount  equal  to  the  par  value  of  the  bonds  de- 
posited. The  bank  thus  not  only  has  the  use  of  an  amount  of 
money  equal  to  the  par  value  of  its  bonds,  but  enjoys  the  interest 
paid  by  the  government  upon  the  latter.  The  expenses  incident  to 
the  issuance  of  circulation  are  relatively  small.  Bonds  for  circu- 
lation purposes  cannot  be  procured  from  the  Treasury  Department, 
but  our  facilities  are  such  that  we  can  supply  the  needs  of  the 
banks  in  this  particular,  deposit  their  bonds  and  attend  to  all  the 
necessary  details  at  the  Treasury.  We  gladly  furnish  all  infor- 
mation needed  as  to  the  kinds  of  bonds  accepted  by  the  Department, 
the  price  of  the  same,  and  the  profits  to  be  derived  from  circulation 
based  on  the  respective  issues  of  bonds  secured  at  prevailing 
prices.    For  further  details  see  Chapter  V,  Part  IV. 

§  401.  Order  for  Circulation. —  A  National  banking  association 
is  entitled  to  circulating  notes  to  the  amount  of  the  face  value 
of  the  U.  S.  bonds  deposited  as  security  therefor,  and  is  entitled  to 
a  total  amount  equal  to  its  capital  stock  paid  in  and  certified  to  the 
Comptroller  of  the  Currency.  An  order  for  plates  and  notes  may 
be  sent  to  the  Comptroller,  with  the  organization  papers.  The 
plate,  however,  must  bear  the  charter  number  and  this  cannot  be 
ascertained  until  charter  is  actually  issued. 


448 

The  Comptroller  has  not  executed  any  orders  for  $1  and  $2 
National  bank  notes. 

§  402.  Issue  of  Comptroller's  Certificate — Commencement  of 
Business.-  If  after  all  the  organization  papers  have  been  filed  the 
Comptroller  is  satisfied  that  the  requirements  of  law  have  been 
complied  with  he  will  give  the  bank  a  certificate  authorizing  it  to 
commence  business  and  will  wire  the  bank  its  charter  number  and 
authority  to  begin  business.  The  bank  may  open  upon  receipt  of 
this  telegram  and  need  not  wait  for  the  Comptroller's  formal  cer- 
tificate. 

A  bank  should  have  a  suitable  banking  house  or  room  and  a 
vault  or  safe  before  beginning  business.  The  Comptroller  should 
be  promptly  advised  of  the  date  on  which  the  bank  opens. 

§  403.  Publication  of  Certificate.—  The  bank  must  publish  the 
Comptroller's  certificate  for  at  least  sixty  days  in  a  newspaper 
published  in  the  city  or  county  where  the  bank  is  located.  (Section 
5170,  E.  S.)  An  insertion  in  a  weekly  newspaper  or  a  weekly 
edition  of  a  daily  is  sufficient.  The  oath  of  the  publisher  that  the 
certificate  has  been  published  for  the  time  required,  with  printed 
copy  of  certificate  attached,  cut  from  the  newspaper,  must  be  filed 
in  the  Comptroller's  office. 

§  404.  Services  of  an  Attorney. —  The  execution  of  the  papers 
required  in  the  organization  of  a  National  bank,  although  not  a 
complex  matter,  yet  involves  considerable  detail,  so  that  unless 
great  care  is  exercised  mistakes  will  occur.  As  attorneys  for 
National  banks  from  about  the  institution  of  the  National  system, 
the  publishers  of  this  work  have  found  it  is  the  exception  rather 
than  the  rule  when  the  papers  are  correctly  executed.  Many  of 
the  organizing  banks,  therefore,  send  their  papers  to  us  with 
authority  to  make  such  corrections  as  we  can  lawfully  make,  since 
if  sent  direct  to  the  Comptroller  the  papers  are  returned  to  the 
bank  for  correction,  even  in  cc^e  of  slight  errors.  In  case  there 
are  errors  required  to  be  corrected  by  the  organizers  themselves, 
we  save  delay  by  wiring  information  as  to  corrections  which  must 


449 

be  made.    These  may  be  made  in  their  duplicate  papers,  and  for- 
warded to  us  to  file. 

Our  firm,  from  long  experience  and  personal  acquaintance  with 
the  Treasury  officials  and  from  giving  personal  attention  to  the 
interests  of  the  banks,  can  guarantee  good  service  in  these  and  all 
other  matters  requiring  the  services  of  an  attorney. 

§  405.  Regulation  of  Comptroller.—  The  Comptroller,  as  here- 
tofore, publishes  each  application  for  authority  to  organize  a 
National  bank,  but  prior  to  formal  approval  he  refers  each  case 
to  the  member  in  Congress  of  the  district;  to  the  National  Bank 
Examiner ;  and  the  State  Bank  Supervisor  for  all  possible  informa- 
tion, particularly  as  to  the  standing  of  the  applicants,  the  demand 
for  a  bank  in  the  place,  and  the  prospects  of  success  if  it  is  estab- 
lished and  conservatively  managed. 

Generally  speaking,  the  Comptroller  will  not  authorize  the 
establishment  of  a  bank  at  a  place  where,  by  reason  of  apparent 
lack  of  business,  there  is  little  likelihood  of  its  success,  or  where 
existing  banking  facilities,  either  National  or  State,  are  unques- 
tionably ample,  or  where  the  character  or  financial  ability  of  the 
proposed  incorporators  is  evidently  doubtful. 

Further,  the  Comptroller  holds  that  the  demand  for  a  bank 
should  emanate  from  the  business  interests  of  the  community, 
not  be  created  by  non-resident  promoters,  interested  merely  in 
compensation  for  soliciting  stock  subscriptions,  furnishing  supplies, 
etc.  For  this  reason  in  every  case  applicants  are  required  to  state 
whether  a  contract,  written  or  verbal,  has  been  entered  into  for 
the  compensation  of  any  one  for  placing  the  stock  or  otherwise 
aiding  in  the  organization  of  the  bank,  in  order  that  the  Comp- 
troller may  be  fully  advised  as  to  the  situation. 

When  application  to  organize  is  formally  approved,  the  title  is 
reserved  for  sixty  days,  and  during  this  time  it  is  expected  that 
bona  fide  subscriptions  to  the  entire  capital  stock  will  be  obtained 
and  the  organization  papers  executed  and  filed.  An  extension  of 
time  for  good  reason  may  be  obtained. 

The  Comptroller  looks  to  the  organizers  of  a  bank  to  select 
Directors  who  can  and  will  give  proper  attention  to  the  bank's 
29 


450 

interests.  The  Statute  provides  that  three-fourths  of  the  Board 
be  residents  of  the  State,  but  the  Comptroller  further  expects 
the  Directors  to  be  selected  from  local  stockholders,  and  requires 
that  the  President  and  a  majority  be  residents  of  the  place. 

In  addition  to  the  preliminary  investigation  above  referred  to, 
a  final  examination  is  sometimes  made  to  determine  whether  all 
provisions  of  law  and  the  conditions  imposed  by  the  Comptroller 
have  been  complied  with.     This  is  only  required  in  rare  cases. 

The  question  of  By-Laws  will  be  treated  in  the  next  chapter. 


CHAPTEE  II. 
By-  Laws. 

Section  406.  General  Instructions. 
407.  Form  of  By-Laws. 

§  406.  General  Instructions.— The  power  to  adopt  by-laws  for 
a  National  bank  is  conferred  on  the  directors  by  the  National 
Bank  Act  (Sec.  5136,  E.  S.),  and  is  generally  incorporated  in  the 
articles  of  association.  It  is  a  requisite  of  every  valid  by-law  of  a 
National  bank  that  it  shall  be  consistent  with  the  National  bank- 
ing laws  and  with  the  articles  of  association;  a  by-law  which  is 
inconsistent  with  either  the  law  or  the  articles  is  void.  Directors 
often  fall  into  the  error  of  supposing  that  because  they  have  power 
to  amend  the  by-laws  they  may  change  them  in  any  respect,  but, 
as  before  stated,  no  amendment  must  conflict  with  provisions  of 
the  articles  of  association,  as  these  provisions  can  be  changed  only 
by  amendment  of  the  Articles  by  the  stockholders,  and  then  only  in 
conformity  with  law.  Thus,  a  by-law  prescribing  the  number  of 
directors  the  bank  shall  have,  and  how  many  shall  constitute  a 
quorum,  can  not  be  amended  by  the  directors  to  conflict  with  any 
provision  of  the  articles  of  association. 

The  Comptroller  requires  that  provision  be  made  in  By-Laws  for 
at  least  a  monthly  meeting  of  the  Board  of  Directors,  the  appoint- 
ment of  Examining  and  Discount  Committees,  the  approval  or 
disapproval  by  the  Board  at  their  meetings  of  all  loans  and  dis- 
counts and  the  recording  of  their  action  in  the  Minute  book. 

A  copy  of  the  by-laws  is  required  to  be  filed  with  the  Comp- 
troller, and  should  be  sent  to  him  with  the  organization  papers. 

§  407.  Form  of  By-Laws. —  The  following  form  of  by-laws  has 
been  found  to  cover  the  general  requirements  of  National  banks, 
but  may  be  modified  in  any  manner  not  inconsistent  with  law  or 
articles  of  association. 

451 


452 

BY-LAWS  OF  THE  [HERE  INSEBT  THE  TITLE  OF  THE  BANK],  OBGANIZED  UNDEB 
THE  NATIONAL  BANKING  LAWS  OF  THE  UNITED  STATES. 

ANNUAL  MEETING. 

Section  1.  The  regular  anual  meetings  of  the  shareholders  of  this 
bank  for  the  election  of  directors  shall  be  held  at  its  banking  house 
on  the  day  in  January  of  each  year  provided  in  the  articles  of  associa- 
tion, between  the  hours  of  10  and  4  of  said  day.  It  shall  be  the  duty 
of  the  board  of  directors,  within  one  month  prior  to  the  time  of  said 
election,  to  appoint  three  shareholders  to  be  judges  of  said  election, 
who  shall  hold  and  conduct  the  same,  and  who  shall,  after  the  elec- 
tion has  been  held,  notify  under  their  hands  the  cashier  of  this 
bank  of  the  result  thereof  and  the  names  of  the  directors-elect. 

Sec.  2.  The  cashier,  upon  receiving  the  returns  of  the  judges  of  the 
elections  as  aforesaid,  shall  cause  the  same  to  be  recorded  upon  the 
minute  book  of  the  bank,  and  shall  notify  the  directors-elect  of  their 
election  and  of  the  time  at  which  they  are  required  to  meet  at  the 
banking  house  of  the  bank  for  the  purpose  of  organizing  the  new 
board.  If  at  the  time  fixed  for  the  meeting  of  the  directors-elect  there 
is  not  a  quorum  in  attendance,  the  members  present  may  adjourn 
from  time  to  time  until  a  quorum  is  secured,  and  no  business  shall  be 
transacted  prior  to  taking  the  oath  of  office  as  prescribed  by  law. 

Sec.  3.  If,  for  any  cause,  the  annual  election  of  directors  is  not  held 
on  the  date  fixed  in  the  articles  of  association,  the  directors  in  office 
shall  order  an  election  to  be  held  on  some  other  day,  of  which  special 
election  notice  shall  be  given  in  accordance  with  the  requirements  of 
section  5149,  United  States  Revised  Statutes,  judges  appointed,  returns 
made  and  recorded,  and  the  directors-elect  notified,  according  to  the 
provisions  of  sections  one  and  two  of  these  by-laws. 

OFFICERS. 

Sec.  4.  The  officers  of  this  bank  shall  be  a  president,  vice-president 
(who  shall  be  members  of  the  board  of  directors),  cashier,  and  such 
other  officers  as  may  be  from  time  to  time  required  for  the  prompt 
and  orderly  transaction  of  its  business,  to  be  elected  or  appointed 
by  the  board  of  directors,  by  whom  their  several  duties  shall  be  pre- 
scribed. 

Sec  5.  The  president  shall  hold  his  office  for  the  current  year  for 
which  the  board  of  which  he  shall  be  a  member  was  elected,  unless 
he  shall  resign,  become  disqualified,  or  be  removed;  and  any  vacancy 
occurring  in  the  office  of  president  or  in  the  board  of  directors  shall 
be  filled  by  the  remaining  members. 

Sec  6.  The  cashier  and  the  subordinate  officers  and  clerks  shall  be 


453 

appointed  to  hold  their  offices,  respectively,  during  the  pleasure  of  the 
board  of  directors. 

Sec.  7.  The  cashier  of  this  bank  shall  be  responsible  for  all  the 
moneys,  funds,  and  valuables  of  the  bank,  and  shall  give  bond,  with 

security  to  be  approved  by  the  board,  in  the  penal  sum  of dollars 

conditioned  for  the  faithful  and  honest  discharge  of  his  duties  as  such 
cashier,  and  that  he  will  faithfully  apply  and  account  for  all  such 
moneys,  funds,  and  valuables,  and  deliver  the  same  to  the  order  of 
the  board  of  directors  of  this  bank,  or  to  the  person  or  persons  au- 
thorized to  receive  them. 

Sec.  8.  The  president  of  this  bank  shall  be  responsible  for  all  Buch 
sums  of  money  and  property  of  every  kind  as  may  be  intrusted  to  his 
care  or  placed  in  his  hands  by  the  board  of  directors  or  by  the  cashier, 
or  otherwise  come  into  his  hands  as  president,  and  shall  give  bond, 

with  security  to  be  approved  by  the  board,  in  the  penal  sum  of 

dollars,  conditioned  for  the  faithful  discharge  of  his  duties  as  such 
president,  and  that  he  will  faithfully  and  honestly  apply  and  account 
for  all  sums  of  money  and  other  property  of  this  bank  that  may  come 
into  his  hands  as  such  president,  and  pay  over  and  deliver  the  same 
to  the  order  of  the  board  of  directors,  or  to  any  other  person  or  per- 
sona authorized  by  the  board  to  receive  the  same. 

Sec.  9.  The  teller  shall  be  responsible  for  all  such  terms  of  money, 
property,  and  funds  of  every  description  as  may  from  time  to  time 
be  placed  in  his  hands  by  the  cashier,  or  otherwise  come  into  his 
possession  as  teller;  and  shall  give  bond,  with  security  to  be  approved 

by  the  board,  in  the  penalty  of  ' —  dollars,  conditioned  for  the 

honest  and  faithful  discharge  of  his  duties  as  teller,  and  that  he  will 
faithfully  apply,  account  for,  and  pay  over  all  moneys,  property,  and 
funds  of  every  description  that  may  come  into  his  hands,  by  virtue 
of  his  office  as  teller,  to  the  order  of  the  board  of  directors  aforesaid, 
or  to  such  person  or  persons  as  may  be  authorized  to  demand  and 
receive  the  same. 

SEAL. 

Sec.  10.  The  following  is  an  impression  of  the  seal  adopted  by  the 
board  of  directors  of  this  bank: 
Impression 

of  seal. 

conveyance  of  real  estate. 

Sec.  11.  All  transfers  and  conveyances  of  real  estate  shall  be  made 
by  the  association,  under  seal,  in  accordance  with  the  orders  of  the 
board  of  directors,  and  shall  be  signed  by  the  president  or  cashier. 


454 

INCREASE   OF    STOCK. 

Sec.  12.  Whenever  an  increase  of  stock  shall  be  determined  upon, 
in  accordance  with  law,  it  shall  be  the  duty  of  the  board  to  notify  all 
the  shareholders  of  the  same,  and  to  cause  a  subscription  to  be  opened 
foi  such  increase  of  capital.  In  the  increase  of  capital  each  share- 
holder shall  have  the  privilege  of  subscribing  for  such  number  of 
shares  of  the  new  stock  as  he  may  be  entitled  to  subscribe  for,  ac- 
cording to  his  existing  stock  in  the  bank.  If  any  shareholder  fails 
to  subscribe  for  the  amount  of  stock  to  which  he  may  be  entitled,  the 
board  of  directors  may  determine  what  disposition  shall  be  made  of 
the  privilege  of  subscribing  for  the  unsubscribed  stock. 

BANKING   HOUBS. 

Section.   13.  This  bank  shall  be  opened  for  business  from  

o'clock  a.  m.  to  — ■ o'clock  p.  m.  of  each  day  of  the  year,  excepting 

Sundays  and  days  recognized  by  the  laws  of  this  State  as  holidays. 

dibectobs'  meetings. 

Sec.  14.  The  regular  meetings  of  the  board  of  diiectors  shall  be 

held  on  the  of  each  month.    When  any  regular  meeting  of  the 

board  of  directors  falls  upon  a  holiday,  the  meetings  shall  be  held 
on  such  other  day  as  the  board  may  previously  designate.  Special 
meetings  may  be  called  by  the  president,  cashier,  or  at  the  request 
of  three  or  more  directors. 

discount  committee. 

Sec.  15.  There  shall  be  a  committee,  to  be  known  as  the  discount 

committee,  consisting  of  the  president,  cashier,  and  directors 

appointed  by  the  board  every  — i — —  months,  to  continue  to  act  until 
succeeded,  who  shall  have  power  to  discount  and  purchase  bills,  notes, 
and  other  evidences  of  debt,  and  to  buy  and  sell  bills  of  exchange;  and 
who  shall,  at  each  regular  meeting  of  the  board  of  directors,  submit  in 
writing  a  report  of  all  bills,  notes,  and  other  evidences  of  debt  dis- 
counted and  purchased  by  them  for  the  bank  since  their  last  report. 
The  board  of  directors  shall  approve  or  disapprove  the  report  of  the 
discount  committee,  such  action  to  be  recorded  in  the  minutes  of  the 
meeting. 

minute  book. 

Sec.  16.  The  organization  papers  of  this  bank,  the  returns  of  the 
judges  of  the  elections,  the  proceedings  of  all  regular  and  special 
meetings  of  the  directors  and  of  the  shareholders,  the  by-laws  and  any 


455 

amendments  thereto,  and  reports  of  the  committees  of  directors  shall 
be  recorded  in  the  minute  book;  and  the  minutes  of  each  meeting 
shall  be  signed  by  the  president  and  attested  by  the  cashier. 

TBANSFEBS    OF    STOCK. 

Seo.  17.  The  stock  of  this  bank  shall  be  assignable  and  transferable 
only  on  the  books  of  this  bank,  subject  to  the  restrictions  and  pro- 
visions of  the  National  banking  laws;  and  a  transfer  book  shall  be 
provided  in  which  all  assignments  and  transfers  of  stock  shall  be 
made. 

Sec.  18.  Transfers  of  stock  shall  not  be  suspended  preparatory  to  the 
declaration  of  dividends;  and,  unless  an  agreement  to  the  contrary 
shall  be  expressed  in  the  assignments,  dividends  shall  be  paid  to  the 
shareholders  in  whose  name  the  stock  shall  stand  at  the  date  of  the 
declaration  of  dividends. 

Sec.  19.  Certificates  of  stock,  signed  by  the  president  and  cashier, 
may  be  issued  to  shareholders  and  the  certificate  shall  state  upon  the 
face  thereof  that  the  stock  is  transferable  only  upon  the  books  of 
the  bank;  and  when  stock  is  transferred,  the  certificates  thereof  shall 
be  returned  to  the  bank,  canceled,  preserved,  and  new  certificates 
issued. 

EXPENSES. 

Sec.  20.  All  the  current  expenses  of  the  bank  shall  be  paid  by  the 
cashier,  who  shall  every  six  months,  or  oftener  if  required,  make  to 
the  board  a  detailed  statement  thereof. 

CONTRACTS. 

Sec.  21.  All  contracts,  checks,  drafts,  etc.,  and  all  receipts  for  cir- 
culating notes  received  from  the  Comptroller  of  the  Currency  shall  be 
signed  by  the  president  or  cashier. 

EXAMINATIONS. 

Sec.  22.  There  shall  be  appointed  by  the  board  of  directors  a  com- 
mittee of members,  exclusive  of  the  president  and  cashier,  whose 

duty  it  shall  be  to  examine  every  six  months  the  affairs  of  this  bank, 
count  its  cash,  and  compare  its  assets  and  liabilities  with  the  ac- 
counts of  the  general  ledger,  ascertain  whether  the  accounts  are  cor- 
rectly kept,  and  the  condition  of  the  bank  corresponds  therewith,  and 
whether  the  bank  is  in  a  sound  and  solvent  condition,  and  to  recom- 
mend to  the  board  such  changes  in  the  manner  of  doing  business,  etc., 
as  sball  seem  to  be  desirable,  the  result  of  which  examination  shall 


456 

be  reported  in  writing  to  the  board  at  the  next  regular  meeting  there- 
after. 

Sec.  23.  The  board  of  directors  shall  have  power  to  change  the  form 
of  the  books  and  accounts  when  deemed  expedient  and  define  the  man- 
ner in  which  the  affairs  of  the  bank  shall  be  conducted. 

QUOKUM. 

Sec.  24.  A  majority  of  all  the  directors  is  required  to  constitute  a 
quorum  to  do  business.  Should  there  be  no  quorum  at  any  regular  or 
special  meeting,  the  members  present  may  adjourn  from  day  to  day 
until  a  quorum  is  in  attendance.  In  the  absence  of  a  quorum  no  busi- 
ness shall  be  transacted. 

CHANGES    IN    BY-LAWS. 

Sec.  25.  These  by-laws  may  be  changed  or  amended  by  the  vote  of 
a  majority  of  the  directors. 


CHAPTER  III. 
Reorganization  of  State  and  Private  Banks. 

Section  408.  General. 

409.  Payment  of  Capital. 

410.  Examination. 

411.  Contract  with  Old  Bank. 

412.  Taking  Over  Assets  of  Old  Bank. 

413.  Certificate  Regarding  Assets — Form. 

414.  Reorganization  of  a  Private  Bank. 

415.  Business  Uninterrupted. 

416.  Services  of  an  Attorney. 

§  408.  General. — Wihere  it  is  proposed  to  reorganize  a  State  or 
private  bank  as  a  National  banking  association  it  is  necessary  to 
close  the  old  bank  in  conformity  with  the  provisions  of  the  laws 
of  the  State  under  which  it  is  operating,  and  then  effect  a  new 
organization  in  conformity  with  the  provisions  of  the  National 
Banking  Act.  The  procedure  in  so  far  as  incorporation  is  con- 
cerned is  identical  with  that  required  in  the  original  organization 
of  a  National  bank. 

The  controlling  motive  in  reorganizing  rather  than  converting  in 
such  case  is  generally  the  desire  to  effect  such  a  distribution  of 
stock  as  will  result  in  the  best  interests  of  the  bank,  and  occasion- 
ally to  provide  for  a  more  satisfactory  investment  of  capital  and 
other  loanable  funds. 

The  liquidation  of  the  old  bank  and  the  organization  of  the  new 
should  be  carried  on  concurrently  in  order  to  save  time  and  not 
have  an  interruption  in  business. 

When  the  proposed  incorporators  of  the  National  bank  have 
filed  an  application  with  the  Comptroller  of  the  Currency  for 
reservation  of  title  and  authority  to  organize,  and  approval  thereof 
is  received,  they  may  immediately  proceed  with  the  organization 
of  the  association. 

457 


458 

§  409.  Payment  of  Capital.— The  Comptroller  construes  the 
law  as  requiring  the  payment  of  capital  stock  of  a  National  bank 
in  cash,  not  in  notes  or  other  evidences  of  debt;  it  therefore  will 
be  found  advisable  to  collect  from  the  most  liquid  assets  of  the 
State  bank  the  amount  necessary  to  enable  the  shareholders  to  pay 
their  subscriptions  to  the  stock  of  the  National  bank ;  that  is,  fifty 
per  cent,  prior  to  being  authorized  to  begin  business,  and  the 
balance  in  monthly  installments  of  ten  per  cent.  each.  The  di- 
rectors may  then  contract  with  the  liquidating  agent  of  the  closed 
bank  for  the  assumption  of  liabilities  to  depositors  and  other 
creditors  on  a  transfer  of  an  equivalent  amount  of  assets  of  a 
character  which  can  be  held  by  a  National  bank. 

In  case  a  State  bank  wishes  to  effect  a  change  to  the  National 
system  without  delay,  and  a  sufficient  amount  of  the  assets  cannot 
be  converted  at  once  into  cash  to  enable  the  stockholders  to  make 
the  50  per  cent,  payment  on  capital  required,  loans  may  be  made 
to  the  stockholders  of  the  State  bank  by  that  bank,  so  that  the 
shareholders  may  be  able  to  pay  the  assessment  on  their  stock  in 
the  new  bank.  Notes  given  for  this  purpose,  however,  can  not  be 
acquired  by  the  new  bank.  A  portion  of  the  capital  paid  in  may  at 
once  be  re-invested  in  assets  of  the  State  bank,  such  as  bank  build- 
ing, etc.,  thus  really  returning  the  payments  on  stock  to  the  stock- 
holders for  their  interests  in  the  assets  of  the  liquidating  bank.  In 
acquiring  assets  of  the  old  bank  the  directors  must  be  governed 
by  the  provisions  of  the  National  bank  act  relating  to  their  charac- 
ter and  volume. 

§  410.  Examination. — When  the  application  is  forwarded  it 
should  be  accompanied,  as  in  other  cases,  by  a  draft  for  $100,  pay- 
able to  the  order  of  the  Comptroller  of  the  Currency,  to  cover  the 
expense  of  investigation.  Upon  receipt  of  this  draft  the  chief 
national-bank  examiner  for  the  district  will  be  directed  to  detail 
an  examiner  to  make  the  investigation,  the  examiner  being  in- 
structed to  arrange  with  the  local  correspondent  in  the  case  as  to 
the  date  when  the  investigation  is  to  be  made.  The  examiner  will 
be  instructed  to  make  a  thorough  examination  of  the  condition  of 
the  bank  which  the  national  bank  is  to  succeed,  and  to  report  upon 


459 

the  character  of  its  assets  and  the  manner  in  which  its  business  has 
been  conducted.  He  will  also  be  required  to  report  upon  the  char- 
acter and  financial  standing  of  the  applicants,  the  ability  of  the 
active  executive  officers  of  the  bank  to  be  succeeded,  whether  they 
have  the  confidence  of  the  community,  and  the  prospect  of  success 
of  the  new  bank. 

In  addition  to  securing  a  report  from  the  examiner,  the  Comp- 
troller will  also  obtain  a  report  from  the  Federal  reserve  bank  of 
the  district;  from  the  State  banking  department,  and  from  such 
other  sources  as  he  may  deem  advisable. 

§  411.  Contract  With.  Old  Bank. — Upon  receipt  of  charter,  the 
authority  to  begin  business,  the  directors  have  authority  to  enter 
into  a  contract  with  the  directors  or  liquidating  agent  of  the  State 
bank  which  the  national  bank  lias  been  organized  to  succeed  for 
the  assumption  of  liabilities  to  depositors  and  other  creditors  of 
the  State  institution,  and  the  taking  over  of  a  like  amount  of 
assets  in  payment  for  such  assumption.  The  surplus  of  assets  over 
liabilities  may  be  purchased  for  cash  or  left  with  the  liquidating 
agent  for  collection  and  distribution  to  the  shareholders  of  the 
state  bank.  Xo  assets  however  can  be  acquired  which  are  not  of 
satisfactory  value  and  which  do  not  conform  in  character  to  the 
requirements  of  the  national  bank  and  Federal  reserve  bank  acts. 
A  duly  executed  and  properly  signed  copy  of  the  contract  in  ques- 
tion should  be  filed  with  the  Comptroller  of  the  Currency. 

§  412.  Taking  Over  Assets  of  Old  Bank.— Acting  under  such 
a  contract  bills  receivable  and  other  assets  should  be  listed,  care- 
fully scrutinized  and  properly  endorsed;  the  banking  house,  if 
purchased,  deeded  to  the  new  bank,  and  the  deed  recorded;  all 
general  and  individual  accounts  closed  and  transferred  and  new 
accounts  opened  and  old  pass  books  called  in  and  new  books  issued. 

§  413.  Certificate  Regarding  Assets — Form. — The  organization 
papers  should  be  accompanied  by  a  statement  of  the  directors  to 
the  effect  that  no  assets  the  holding  of  which  contravene  the  pro- 
visions of  the  National  banking  law  will  be  purchased  or  other- 


460 

wise  acquired  by  the  association,  the  statement  being  in  the  follow- 
ing form  and  language: 

STATEMENT,  NONACQUIBEMENT  OF  PROHIBITED  ASSETS. 

We,  the  undersigned,  a  majority  of  the  board  of  directors  of  the 
National  Bank  of  — ,  in  the of      .  State  of , 


hereby  certify  that  any  assets  which  may  be  purchased  or  otherwise 

acquired  by  said  National  bank  from  the  Bank  of         ■    ,  will 

not  include  real  estate,  except  banking  premises,  stocks,  loans  secured 
by  real  estate,  except  such  as  are  permitted  by  section  24  of  the  Federal 
Reserve  Act,  nor  any  loan  in  excess  of  10  per  cent,  of  the  capital  stock 
of  the  National  bank  actually  paid  in  and  unimpaired,  and  10  per  cent, 
of  unimpaired  surplus  fund. 


Directors. 

Subscribed  and  sworn  to  before  me,  this day  of ,  192 — . 

[notarial  seal.]  , 

"Notary  Public. 

§  414.  Reorganization  of  a  Private  Bank.-  The  reorganization 
of  a  private  bank  requires  a  similar  proceeding  to  that  of  a  State 
bank,  except  that  it  is  presumed  the  proprietors  have  authority, 
as  individuals,  to  terminate  their  business  and  sell  and  transfer  the 
assets  to  the  National  bank. 

§  415.  Business  "Uninterrupted. — By  liqudating  the  State  bank 
and  organizing  the  national  bank  concurrently  arrangements  can 
be  made  for  the  National  bank  to  begin  business  simultaneously 
with  the  closing  of  the  State  or  private  bank  which  it  succeeds, 
without  a  cessation  of  business. 

§  416.  Services  of  an  Attorney.— The  publishers  maintain  a 
legal  department  which  will  examine  reorganization  papers  before 
filing  with  the  Comptroller,  and  furnish  any  further  information 
and  advice  desired. 


CHAPTER  IV. 
Conversion  of  State  Bank  to  National. 

Section  417.  Provisions  of  Law. 

418.  Necessity  for  Incorporation. 

419.  Capital  of  Bank. 

420.  Application  to  Convert. 

421.  Prohibited  Assets. 

422.  Examination. 

423.  Authorization  by  Shareholders. 

424.  Authority  for  Conversion — Form. 

425.  Execution  of  Papers. 

426.  Articles  of  Association — Form. 

427.  Organization  Certificate — Form. 

428.  Branches. 

429.  Appointment  and  Signatures  of  Officers. 

430.  Certificate  of  Payment  of  Capital. 

431.  Continuation  of  Directors. 

432.  Certificates  of  Stock. 

433.  Status  of  Converted  Bank. 

434.  Conversion  or  Beorganization. 

§  417.  Provisions  of  Law. — Section  5154,  U.  S.  R.  S.,  as 
amended  by  section  8  of  the  Federal  Reserve  Act  provides  in  sub- 
stance that  any  bank  incorporated  by  special  law  or  organized  under 
the  general  laws  of  any  State  with  an  unimpaired  capital  sufficient 
to  entitle  it  to  become  a  National  bank  may,  by  the  vote  of  the 
shareholders  owning  not  less  than  fifty-one  per  centum  of  its 
capital  stock,  and  with  the  approval  of  the  Comptroller  of  the 
Currency,  be  converted  into  a  National  bank,  with  any  name 
approved  by  the  Comptroller:  Provided,  however,  that  said  con- 
version is  not  in  contravention  of  the  State  law. 

The  articles  of  association  and  organization  certificate  may  be 
executed  by  a  majority  of  the  directors  of  the  bank,  and  the  certi- 

461 


462 

ficate  shall  declare  that  the  owners  of  fifty-one  per  centum  of  the 
capital  stock  have  authorized  the  directors  to  make  such  certificate 
and  to  change  or  convert  the  bank  into  a  national  association.  A 
majority  of  the  directors,  after  executing  the  articles  of  association 
and  the  organization  certificate,  shall  have  power  to  execute  all 
other  papers  and  to  do  whatever  may  be  required  to  make  its 
organization  perfect  and  complete  as  a  National  association. 

§  418.  Necessity  for  Incorporation. — A  bank  proposing  to  con- 
vert to  a  National  bank  must  be  a  State  institution  incorporated 
either  by  special  charter  or  under  some  general  statute. 

The  Solicitor  of  the  Treasury  has  held  in  a  recent  opinion  that 
a  trust  company  organized  under  State  laws  may  be  permitted  to 
convert  to  a  National  bank  under  the  provisions  of  this  section, 
provided  it  complies  with  all  the  conditions  of  law,  and  divests 
itself  of  all  its  trust  company  business,  except  such  as  the  Federal 
Eeserve  Board  might  specifically  authorize  it  to  retain  as  provided 
by  the  Federal  Eeserve  Act. 

§  419.  Capital  of  Bank. — A  State  bank  converting  must  have  a 
capital  paid  in  and  unimpaired  of  not  less  than  the  amount  pre- 
scribed by  the  National  Bank  Act  (See  Sec.  367).  When  it  is 
necessary  to  increase  capital  the  increase  must  be  legally  effected 
under  State  law  prior  to  conversion.  It  depends  upon  the  re- 
quirements of  the  laws  of  the  State  in  which  the  bank  is  located 
whether  it  is  better  to  increase  under  State  laws,  and  then  con- 
vert, or  to  put  the  State  bank  in  liquidation  and  reorganize. 
Sometimes  considerable  delay  is  avoided  by  taking  the  latter 
course.  When  a  bank  increases  its  capital  before  conversion  the 
Comptroller  requires  as  evidence  of  pajonent  of  such  increase  a 
certificate  of  the  State  officer  with  whom  the  certificate  of  increase 
is  filed.  Conversion  papers  cannot  be  lawfully  executed  prior  to 
effecting  the  necessary  increase. 

§  420.  Application  to  Convert.—  The  first  step  in  the  process  of 
converting  a  bank  incorporated  under  State  laws  into  a  National 
bank  is  for  the  board  of  directors  to  file  a  formal  application  with 
the  Comptroller  of  the  Currency  asking  for  the  approval  of  said 


463 

conversion  and  naming  the  title  desired.  The  Comptroller  then 
orders  an  examination  of  the  bank,  and  if  its  condition  is  found 
to  be  satisfactory  and  the  title  selected  is  available  the  bank  will 
be  so  notified  and  conversion  papers  furnished. 

The  following  is  the  form  of  notice  to  be  submitted  of  intention 
to  convert  a  State  bank  into  a  National  banking  association : 

APPLICATION     TO     CONVEET     A     STATE     BANK     INTO     A     NATIONAL     BANKING 

ASSOCIATION. 

The  name  of  the  place  should  form  a  part  of  the  title,  thus,  "The 

First  National  Bank  of  A ,"  but  the  name  of  the  State  should 

not  be  included. 

Consideration  will  not  be  given  to  an  application  for  a  title  in- 
cluding the  word  "First,"  if  a  National  bank  exists  at  the  given 
locality;  nor  to  an  application  for  a  title  identical  with  that  of  a 
National  bank  heretofore  in  existence,  nor  to  one  materially  sim- 
ilar to  that  of  a  National,  State,  or  other  bank  existing  in  the  place. 

— ,  192—. 

TO   the   COMPTBOLLEB  OF   THE   CUBBENCT, 

Washington. 

Sib:  Notice  is  hereby  given  that  we,  the  undersigned,  being  a  ma- 
jority of  the  board  of  directors  of  "The ,"  having  a  paid 

in  and  unimpaired  capital  of  $  ■  ,  intend  to  convert  the  said  bank 
into  a  National  banking  association,  in  accordance  with  the  provisions 
of  section  5154  of  the  Revised  Statutes  of  the  United  States  as  amended 

by  section  8  of  the  Federal  Reserve  Act,  under  the  title  "The  

,"  to  be  located  at  ,  county  of  — ■ ,   State  of 

— with  capital  of  % .    Population  — »— — >. 

TVe  request  that  the  title  be  reserved  for  a  period  of  sixty  days  and 

the  necessary  conversion  papers  and  instructions  sent  to ■ — , 

at ,  hereby  agreeing  that  any  assets  of  the  State  bank 

which  can  not  be  legally  held  by  a  National  bank  will  be  disposed  of 
before  certificate  authorizing  conversion  and  the  commencement  of 
business  as  a  National  banking  association  is  issued. 


Signatures  of  directors 


Residences 


464 

§  421.  Prohibited  Assets. — Under  the  national  banking  laws  any 
association  may  make  loans  on  personal  security,  and  any  national 
banking  association  not  situated  in  a  central  reserve  city  is  author- 
ized by  section  24  of  the  Federal  reserve  act  to  make  loans  secured 
by  improved  and  unencumbered  farm  land  situated  within  its  Fed- 
eral reserve  district  or  within  a  radius  of  100  miles  of  the  place  in 
which  such  bank  is  located,  irrespective  of  district  lines,  and  may 
also  make  loans  secured  by  improved  and  unencumbered  real  estate 
located  within  100  miles  of  the  place  in  which  such  bank  is  located, 
irrespective  of  district  lines ;  but  no  loan  made  upon  the  security  of 
such  farm  land  shall  be  made  for  a  longer  time  than  five  years, 
and  no  loan  made  upon  the  security  of  such  real  estate  as  distin- 
guished from  farm  land  shall  be  made  for  a  longer  time  than 
one  year,  nor  shall  the  amount  of  any  such  loan,  whether  upon  such 
farm  land  or  upon  such  real  estate,  exceed  50  per  cent,  of  the 
actual  value  of  the  property  offered  as  security.  Any  such  bank 
may  make  such  loans,  whether  secured  by  such  farm  land  or 
such  real  estate,  in  an  aggregate  sum  equal  to  25  per  cent,  of  its 
capital  and  surplus  or  to  one-third  of  its  time  deposits. 

National  banks  are  prohibited  from  investing  in  real  estate  other 
than  that  necessary  to  the  conduct  of  the  business  of  the  bank,  and 
are  restricted,  with  certain  exceptions,  in  the  volume  of  accommo- 
dations to  any  one  person,  company,  corporation,  or  firm,  etc.,  to 
10  per  cent,  of  the  capital  stock  of  the  association  actually  paid  and 
unimpaired  and  10  per  cent,  of  its  unimpaired  surplus  fund.  The 
courts  have  held  that  it  is  ultra  vires  of  a  National  banking  associa- 
tion to  invest  in  the  stock  of  another  corporation.  State  banks  pro- 
posed to  be  converted  and  holding  prohibited  assets  are  expected  to 
dispose  of  them  prior  to  being  authorized  to  begin  business  as  a 
National  banking  association,  and  conversion  may  be  expedited  by 
the  directors  signing  an  agreement  that  such  assets  will  be  collected 
immediately  or  otherwise  disposed  of. 

§  422.  Examination. — When  an  application  to  convert  is  for- 
warded it  should  be  accompanied  by  a  draft  for  $100,  payable  to 
the  order  of  the  Comptroller  of  the  Currency,  to  cover  the  expense 
of  examination.     Upon  receipt  of  this  draft  the  chief  national 


4G5 

bank  examiner  for  the  district  is  directed  to  detail  an  examiner  to 
make  the  investigation,  the  examiner  being  instructed  to  arrange 
with  the  officers  of  the  bank  as  to  the  date  when  the  examination 
is  to  be  made.  The  examiner  investigates  the  character  and  finan- 
cial standing  of  the  officers  and  directors,  and  reports  on  the  manner 
in  which  the  State  bank  has  been  managed,  what  the  officers  have 
accomplished  in  the  community,  and  also  as  to  the  probability  of  the 
success  of  the  bank  as  a  national  bank.  The  examiner  is  also  in- 
structed to  prepare  a  list  of  the  assets  of  the  State  bank  that  do  not 
conform  to  the  provisions  of  the  national  bank  act  or  the  Federal 
reserve  act. 

In  addition  to  securing  the  report  from  the  examiner,  the  Comp- 
troller will  also  obtain  a  report  from  the  Federal  Eeserve  bank  of 
the  district;  from  the  State  bank  department  and  from  other 
sources. 

§  423.  Authorization  by  Shareholders. — When  the  application 
to  convert  has  received  the  Comptroller's  approval,  a  meeting  of 
the  shareholders  of  the  State  bank  should  be  called,  the  notice  of 
the  meeting  required  by  the  laws  of  the  State  or  the  articles  of 
association  or  incorporation,  having  been  given.  At  this  meeting  a 
resolution  should  be  adopted  by  a  vote  representing  not  less  than 
51  per  cent,  of  the  capital  stock  of  the  bank  authorizing  the  board 
of  directors  to  change  and  convert  the  bank  into  a  National  bank- 
ing association  under  the  provisions  of  Section  5154,  IT.  S.  E.  S., 
and  acts  amendatory  thereof;  also  authorizing  the  directors,  or  a 
majority  thereof,  to  make  and  execute  the  articles  of  association 
and  organization  certificate,  and  all  other  papers  and  certificates, 
and  to  do  all  acts  necessary  to  conversion  of  the  bank  into  a  Na- 
tional banking  association. 

§  424.  Authority  for  Conversion — Form. —  The  following  is  the 
form  furnished  by  the  Comptroller  of  the  Currency  for  reporting 
the  resolution  adopted  by  the  shareholders: 


30 


4GG 


ATJTHOBITY   FOB   CONVERSION   OF   BTATE   BANK. 


At  a  meeting  of  the  shareholders  of 


-,  held  on 


the  notice  of  the  proposed  meeting  required  hy  the  laws  of  the  State 
or  the  articles  of  association  or  incorporation  of  said  bank  having 
been  given,  it  was  resolved  that  the  board  of  directors  of  this  bank 
be  authorized  to  change  and  convert  said  bank  into  a  National  banking 
association  under  the  provisions  of  section  5154  of  the  Revised  Statutes 
of  the  United  States,  or  of  acts  amendatory  thereof;  and  we  do  also 
authorize  the  said  directors,  or  a  majority  thereof,  to  make  and 
execute  the  articles  of  association  and  organization  certificate  required 
to  be  made  or  contemplated  by  said  statutes;  and  also  to  make  and 
execute  all  other  papers  and  certificates  and  to  do  all  acts  necessary 
to  convert  the  said  bank  into  a  National  banking  association;  and  to 
do  and  perform  all  such  acts  as  may  be  necessary  to  transfer  the 
assets  of  every  description  and  character  of  the  said  State  bank  to 
the  National  banking  association  into  which  it  is  to  be  converted,  so 
that  the  said  conversion  may  be  absolute  and  complete;  and  we  do 
hereby  assume,  and  authorize  the  said  directors  to  assume,  as  the 
name  of  the  National  banking  association  into  which  the  said  State 

bank  is  to  be  converted,  "The ";  and  we  do  hereby  appoint 

,  who  are  now  the  directors  of  the  said  State  bank,  to  be  the 


directors  of  the  said  National  bank,  to  hold  their  offices  as  such 
directors  until  the  regular  annual  election  of  directors  is  held,  pur- 
suant to  the  provisions  of  said  Revised  Statutes,  and  until  their  suc- 
cessors are  chosen  and  qualified;  and  we  do  hereby  authorize  the 
said  directors  of  the  said  National  bank  to  continue  in  office  the 
officers  of  the  said  State  bank,  or  to  appoint  or  elect  others,  as  to  them 
may  seem  best. 

The  foregoing  resolution  was  adopted  by  the  following  vote,  repre- 
senting not  less  than  51  per  cent,  of  the  capital  stock  of — i , 

no  one  having  acted  as  proxy  who  is  not  authorized  to  so  act  under 
the  laws  of  the  State. 


Name  of  shareholder 


Residence 


Name  of  proxy 


No.  of  shares 


Total  number  of  shares  voted  in  favor  of  the  resolution, 

Total  number  of  shares  voted  against  the  resolution,  

Total  number  of  shares  represented  at  the  meeeting, 

Total  number  of  shares  of  capital  stock.     ■ 


467 

I  hereby  certify  that  this  is  a  true  and  correct  report  of  the  vote 
and  of  the  resolution  adopted  at  a  meeting  of  the  shareholders  of 
this  bank  held  on  the  date  mentioned. 

[seal  of  bank.] , 

President  or  Cashier. 

Subscribed  and  sworn  to  before  me  this  — —  day  of ,  A.  D. . 

[seal  of  notary.]  , 

Notary  Public. 

§  425.  Execution  of  Papers. — In  the  case  of  a  conversion,  the 
articles  of  association  and  organization  certificate  are  executed  by 
the  directors,  and  not  by  the  shareholders,  and  a  majority  of  the 
directors  fulfills  the  requirements  of  the  law. 

§  426.  Articles  of  Association — Form.—  The  wording  of  the 
first  part  of  the  articles  of  association  should  be  as  follows : 

Form  of  Articles  of  Association. 

We,  the  undersigned,  directors  of  the  ,  having  been  author- 
ized by  a  vote  of  shareholders  owning  not  less  than  fifty-one  per  cent, 
of  the  capital  stock  of  said  bank  to  change  and  convert  the  said  bank 
into  a  National  banking  association,  under  the  provisions  of  Section 
5154  of  the  Revised  Statutes  of  the  United  States,  or  of  acts  amendatory 
thereof,  and  to  execute  articles  of  association,  do  hereby,  in  our  own 
behalf,  and  in  behalf  of  the  stockholders  whom  we  represent,  make 
and  execute  the  following  articles  of  association: 

First.  The  title  of  the  association  into  which  the  said  State  bank 
is  to  be  changed  and  converted  shall  be  "The . 

From  this  point  the  articles  will  follow  the  form  given  under 
organization  de  novo.     (See  Chapter  I.) 

§  427.  Organization  Certificate — Form. —  The  following  is  the 
form  for  organization  certificate  furnished  by  the  Comptroller  of 
the  Currency  in  cases  of  conversion : 

ORGANIZATION    CERTIFICATE. 

We,  the  undersigned  directors  of  the ■ ,  having  been  duly 

authorized  by  a  vote  of  shareholders  owning  not  less  than  fifty-one  per 
cent,  of  its  capital  stock  to  change  and  convert  said  bank  into  a 
National  banking  association,  and  to  make  the  necessary  organization 


468 


certificate,  under  the  provisions  of  section  5154  of  the  Revised  Statutes 
of  the  United  States,  or  of  acts  amendatory  thereof,  do  sign  and  execute 
the  following  organization  certificate,  which  we  hereby  declare  we  are 
authorized  to  make  by  a  vote  of  shareholders  owning  not  less  than 
fifty-one  per  cent,  of  the  capital  stock  of  the  said  State  bank. 

First.  The  title  of  this  association  shall  be  "The — ." 

Second.  The  said  association  shall  be  located  and  continued  in  the 
of ,  county  of ,  and  State  of  — i ,  where  its  opera- 


dollars 


tions  of  discount  and  deposit  are  to  be  carried  on. 

Third.    The  capital  stock  of  this  association  shall  be  — 

($ ),  divided  into  shares  of  < —  dollars  each,  as  it  is 

now  divided  in  the  said  State  bank. 

Fourth.  The  name  and  residence  of  each  of  the  stockholders  of  the 
said  State  Bank,  which  is  to  become  a  National  bank  under  the  pro- 
visions of  the  Revised  Statutes  aforesaid,  and  the  number  of  shares 
of dollars  each  held  by  each  stockholder  are  as  follows: 


Name 


No.  of  shares 


Fifth.  This  certificate  is  made  in  order  that  the  said  State  bank  and 
the  stockholders  thereof  may  avail  themselves  of  the  advantages  of  the 
aforesaid  Revised  Statutes,  and  that  the  said  State  bank  may  be 
changed  and  converted  into  a  National  banking  association  under  the 
foregoing  title. 

In  witness  whereof  we  have  hereunto  set  our  hands  this day 

of— . 


The  signatures  of  a  majority  of  directors  required. 
Acknowledgment  must  be  before  a  notary  public  or  judge  of  court 
and  authenticated  by  the  seal  of  such  notary  or  court. 


State  of 


County  of 


Before  the  undersigned,  a 


of 


personally  appeared 


directors  of  the  aforesaid  State  bank,  to  me  well  known,  who  severally 


469 

acknowledged  that  they  executed  the  foregoing  certificate  for  the  pur- 
poses therein  mentioned. 

Witness  my  hand  and  seal  of  office  this day  of  . 

[official  seal  of  officer.]  , 


§  428.  Branches. — In  case  a  State  bank  converting  to  a  National 
bank  has  one  or  more  Branch  banks,  it  will  be  necessary  to  insert  in 
the  above  form  of  organization  certificate  after  the  name  of  the 

State  in  the  second  section  "with  Branch  at ,"  and  add  to 

section  third  "of  which  amount  $ has  been  assigned  and  trans- 
ferred to  the  Branch  of  this  Bank  at ." 

§  429.  Appointment  and  Signatures  of  Officers. — If  officers  of 
the  converting  bank  are  serving  an  unexpired  term  the  form  for 
official  signatures  which  is  given  under  organization  de  novo  should 
be  interlined  to  read  "appointed  at  a  meeting  of  the  directors  of 
the  State  bank  held ." 

§  430.  Certificate  of  Payment  of  Capital. —  This  is  a  certificate 
of  the  president  or  cashier  of  the  bank  to  the  Comptroller,  showing 
that  the  amount  of  paid-in  and  unimpaired  capital  of  the  bank 
converting  meets  the  legal  requirement.     The  following  is  the  form : 

CERTIFICATE  RELATIVE  TO  PAYMENT  OF  CAPITAL  STOCK  OF  STATE  BANK   CON- 
VERTING INTO  NATIONAL  BANK. 


It  is  hereby  certified  that  the <—  Bank of 


which  is  to  be  converted  into  "The National Bank  of——," 

in  conformity  with  the  provisions  of  section  5154  of  the  Revised  Stat- 
utes of  the  United  States,  and  acts  amendatory  thereof,  authorizing  the 
conversion  of  "any  bank  incorporated  by  special  law  or  any  banking 
institution  organized  under  a  general  law  of  any  State,"  has  a  paid 
in  and  unimpaired  capital  of  $ — . 


President  or  Cashier. 
State  of , 


County  of 


Subscribed  and  sworn  to  before  the  undersigned,  a of  the  said 

county,  this  day  of  ■ — ,  192 — . 

[OFFICIAL  SEAL  OF  OFFICEB.]  ' ', 


[Official  Title.] 


470 

§  431.  Continuation  of  Directors.— Duly  qualified  directors  of 
a  State  bank  being  converted  into  a  National  bank  may  continue 
as  directors,  regardless  of  the  number  of  shares  owned,  until  the 
first  annual  election  is  held  when,  to-  be  eligible  for  re-election, 
they  must  own  the  number  of  shares  required  by  the  National 
Bank  Act.  The  oaths  should  be  taken  as  directors  of  the  National 
bank.  Unless  officers  are  reappointed  by  the  directors  of  the 
National  bank  subsequent  to  their  qualification,  the  form  requir- 
ing the  signatures  of  the  officers  of  the  National  bank  should  show 
date  of  appointment  by  the  directors  of  the  State  bank.  The 
minimum  number  of  directors  for  a  National  bank  is  five,  and  if 
the  State  bank  has  less  than  that  number  an  increase  must  be 
made  under  State  law  prior  to  conversion. 

§  432.  Certificates  of  Stock. —  A  State  bank  converting  to  a 
National  bank  is  not  required  to  issue  new  certificates  of  stock,  al- 
though it  is  preferable  to  do  so.  If  the  old  certificates  are  retained 
they  should  be  stamped  to  show  the  new  corporate  title  and  date 
of  the  changed  jurisdiction.  The  shares  may  continue  to  be  for 
the  same  amount  as  they  were  before  the  conversion. 

§  433.  Status  of  Converted  Bank. — In  the  conversion  of  a  State 
bank  there  is  not  a  dissolution  of  the  State  corporation,  but  merely 
a  change  of  title  and  governmental  supervision;  the  bank  is  liable 
for  all  obligations  and  may  enforce  all  contracts  made  with  it 
while  a  State  corporation.  (See  Metropolitan  National  Bank  v. 
Claggett,  141  U.  S.,  520.)  In  the  case  of  Casey  v.  Galli  (94 
U.  S.,  673)  the  Supreme  Court  of  the  United  States  held  that 
no  authority  from  a  State  is  necessary  to  enable  a  State  bank  to 
become  a  National  banking  association.  Since  that  decision,  how- 
ever, the  provisions  of  section  5154  U.  S.  R.  S.  have  been  amended 
by  the  Federal  Reserve  Act,  so  that  a  State  bank  can  not  be  con- 
verted to  a  National  bank  if  such  conversion  is  forbidden  by  the 
laws  of  the  State. 

§  434.  Conversion    or   Reorganization. — It  is  impossible  to  de- 
termine without  some  knowledge  of  the  status  of  a  bank  and  local 


471 

conditions  which  plan  is  preferable  in  changing  to  the  National 
system.  We  will  be  glad  to  give  applicants  the  benefit  of  our 
long  experience,  and  are  glad  to  render  every  possible  assistance 
in  examining  and  filing  organization  papers  and  in  obtaining  Na- 
tional charter. 


CHAPTEE  V. 
Bonds  and  Circulation. 

Section  435.  The  Circulation  Privilege. 

436.  Order  for  Plates  and  Circulation — Form. 

437.  Deposit  of  Bonds. 

438.  What  Bonds  Are  Acceptable. 

439.  Treasury  Procedure. 

440.  Profits  on  Circulation  Accounts. 

441.  Withdrawal  of  Bonds — Forms. 

442.  Withdrawal  Under  Sec.  18  of  Federal  Reserve  Act. 

443.  Circulation  Bonds  as  Security  for  Public  Moneys. 

444.  Witnessing  Destruction  of  Mutilated  Currency — An- 

nual Examination  of  Bonds. 

445.  The  Five  Per  Cent.  Fund. 

446.  Same — Keeping  Fund  Intact. 

447.  Same — Redemptions  of  Mutilated  Notes. 

448.  Same — Remittances. 

449.  Ledger  Accounts  Covering  Circulation. 

450.  The  Circulation  Account. 

451.  The  Five  Per  Cent.  Fund  Account. 

452.  Method  of  Verifying  Remittances. 

453.  Disposition  of  Notes  Redeemed. 

454.  Issue  of  New  Circulating  Notes. 

455.  Legal  Tender  and  Lawful  Money — What  Is. 

456.  Tax  on  Circulation — Form  for  Making  Return. 

457.  Same — Requirement  and  Penalty  for  Failure. 

458.  Same — How  Payment  Made. 

459.  Same — Percentage  Assessed  and  Period. 

460.  Same — Computing  Amount. 

461.  Tax  Required  Only  on  Actual  Circulation. 

472  | 


473 


§  435.  The  "Circulation"  Privilege. — Any  National  bank  may 
issue  its  own  bank  notes  up  to  an  amount  equal  to  the  full  amount 
of  its  paid-in  capital  stock.  This  right  exists  without  the  formal- 
ity of  making  an  application  to  the  Comptroller  of  the  Currency. 

§  436.  Order  For  Plates  and  Circulation — Form.— When  a  Na- 
tional bank  wishes  to  issue  circulating  notes  it  should  forward 
to  the  Comptroller  of  the  Currency,  in  the  following  form,  an 
order  for  the  engraving  of  the  plates  and  the  printing  of  the  cur- 
rency. It  takes  the  Bureau  of  Engraving  and  Printing  at  least 
forty  days  to  fill  an  original  order,  at  a  cost  of  $130  per  plate. 
Check  to  cover  this  cost  should  accompany  the  order.  The  Comp- 
troller has  declined  to  accept  orders  for  $1  and  $2  National  bank 
notes  and  will  probably  continue  this  policy. 

ORIGINAL  ORDER  FOR  PLATES  AND  CIRCULATION. 

Charter  No.  — — . 


National 


Bank  of 


19- 


To  the  Comptroller  of  the  Currency. 

Sir:  You  are  requested  to  have  plates  engraved  for  this  bank,  and 
circulating  notes  printed  therefrom,  as  follows: 


No.  of  sheets  ordered 


Denominations  on  sheets 


fL,fL,$L,fL. 


85,  85,  #>.  85 

810,  $10,  #10,  $10... 
?10,$10,  810,  820... 
$50,  850.  850,  SI  00. 


Total. 


Value  per 
sheet 


14 

8 
20 

40 

50 
250 


Amount  of  order 


Respectfully, 


Cashier. 


Note. — The  act  of  October  5,  1917,  provides  for  the  issuance  of  $1 
and  $2  notes,  repealing  the  act  of  June  3,  1864,  which  prohibited 
National  banks  from  being  furnished  with  notes  of  less  denomination 
than  $5  after  the  resumption  of  specie  payments. 


474 

Circulation  may  be  ordered  from  any  one  or  more  of  the  plates 
listed  above,  but  no  bank  shall  receive  or  have  in  circulation  at  any- 
one time  more  than  $25,000  in  notes  of  the  denominations  of  $1  and  $2. 

The  restriction  as  to  the  issue  of  $5  notes  to  one-third  of  a  bank's 
circulation  has  been  repealed,  and  notes  of  that  denomination  may 
be  issued  in  any  amount  desired  not  in  excess  of  the  capital  stock 
against  the  deposit  of  bonds. 

It  will  ordinarily  require  about  40  days  to  engrave  the  plate  and 
to  print  circulating  notes,  but  the  order  will  not  be  acted  upon  until 
either  bonds  are  deposited  for  circulation  or  a  draft  in  payment  of 
cost  of  engraving  is  received  by  the  Comptroller. 

Bank  plates  cost  $130  each  for  originals  and  $120  each  for  duplicates 
when  the  originals  are  worn  out. 

§  437.  Deposit  of  Bonds.— Legally  acceptable  bonds  of  a  par 
value  equal  to  the  amount  of  circulation  to  be  issued  may  then  be 
deposited  at  any  time  with  the  Comptroller  of  the  Currency.  It  is 
advisable,  however,  not  to  deposit  the  bonds  until  the  printing 
of  the  currency  has  been  completed,  as  the  bank  ordinarily  can  use 
its  funds  to  better  advantage,  during  the  interval,  than  by  having 
them  merely  invested  in  the  low  income-producing  bonds  that 
bear  the  circulation  privilege. 

§  438.  What  Bonds  Are  Acceptable. — The  only  bonds  now  ac- 
ceptable to  the  Treasury  to  secure  circulation  are  the  2  per  cent. 
Consols  of  1930,  the  2  per  cent.  Panamas  of  1936  and  1938,  and 
the  "Old  Fours"  of  1925.  The  Consols  bear  no  date  of  maturity, 
merely  being  redeemable  on  and  after  April  1,  1930,  at  the  pleas- 
ure of  the  Government.  It  is  hardly  likely  that  these  bonds  will 
be  redeemed  at  a  time  when  the  Government  has  outstanding  large 
quantities  of  bonds  bearing  over  4  per  cent,  interest.  The  Panamas 
are  pa3-able  August  1st  and  November  1st,  1936  and  1938,  re- 
spectively. The}'  may  be  redeemed  at  any  time  at  the  Govern- 
ment's pleasure.  The  fours  are  redeemable  merely  at  the  pleasure 
of  the  Government  on  and  after  February  1,  1925.  When  the  lat- 
ter are  used  as  security  for  circulation  they  are  subject  to  a  tax 
of  1  per  cent,  per  annum,  payable  semi-annually,  while  the  tax 
on  the  2  per  cent,  bonds  is  y2  of  1  per  cent,  per  year. 

We  make  a  specialty  of  dealing  in  these  bonds.     Representing 


475 

as  we  do  a  majority  of  the  National  banks  in  the  country,  we  are 
constantly  in  touch  with  liquidating  banks  which  desire  to  dis- 
pose of  their  bonds,  and  we  can  supply  the  needs  of  purchasing 
banks  at  reasonable  prices,  which  include,  without  additional 
charge,  attending  to  all  details  at  the  Treasury. 

§  439.  Treasury  Procedure.— In  depositing  the  bonds  care 
should  be  taken  to  have  them  assigned  to  "The  Treasurer  of  the 
United  States  in  trust  for"  the  issuing  bank.  After  the  bonds  are 
deposited  and  temporary  receipts  taken  therefor,  the  bonds  are 
sent  to  the  Division  of  Loans  and  Currency,  where  they  are  can- 
celled and  new  bonds  issued  in  their  stead.  The  new  bonds  are 
returned  in  several  days  to  the  Comptroller,  who  deposits  them 
with  the  Treasurer  of  the  United  States.  The  former  then  author- 
izes the  Issuing  Division  to  ship  the  new  currency  directly  to  the 
bank  by  registered  mail  insured.  The  Treasurer  retains  the  bonds 
and  in  due  course  forwards  to  the  issuing  bank  his  official  duplicate 
receipt  therefor. 

§  440.  Profits  on  "Circulation"  Accounts.— Obviously  a  certain 
annual  profit  can  be  secured  from  the  maintenance  of  a  circula- 
tion account  over  and  above  the  interest  derived  from  lending 
out  the  money  used  to  purchase  the  bonds  at  the  prevailing  in- 
terest rates.  Either  2  per  cent,  or  4  per  cent,  interest  is  received 
on  the  bonds  in  which  the  bank  has  invested,  and  as  the  Govern- 
ment supplies  the  bank  with  a  like  amount  of  currency,  the  lat- 
ter may  be  loaned  out  at  the  prevailing  interest  rates.  The  2 
per  cent,  or  4  per  cent,  derived  from  the  bonds  therefore  repre- 
sents the  gross  additional  profit.  From  this  gross  profit,  how- 
ever, must  be  deducted  the  tax  on  circulation,  Treasury  expenses 
for  shipments  of  renewed  currency  (estimated  at  $63.00  a  year), 
and  loss  of  interest  on  the  5  per  cent,  redemption  fund  which 
must  be  maintained  against  outstanding  circulation.  When  the 
bonds  are  purchased  at  a  premium,  the  deductions  should  in- 
clude a  sinking  fund,  to  be  set  aside  each  year,  to  retire  the  pre- 
mium on  the  bonds  and  improved  at  the  prevailing  rate  of  in- 
terest.    Thus  a  circulation  account  of  $100,000,  based  upon  2 


476 

per  cent.  Consols,  purchased  at  101,  would  yield  the  issuing  bank 
a  yearly  profit  of  $1,135.00  over  and  above  the  profit  derived 
from  lending  out  the  net  cost  of  the  bonds,  assuming  money  at 
5  per  cent.  The  increased  profit  from  a  like  amount,  based  on 
4  per  cent,  bonds  of  1925,  purchased  at  106^,  would  be  $1,546.00 
a  year.  The  profit  on  greater  or  less  amounts  of  circulation  will 
be  proportionate. 

§  441.  Withdrawal  of  Bonds — Forms. — Circulating  notes  may 
be  retired  and  the  bonds  withdrawn,  with  the  consent  of  the 
Comptroller  of  the  Currency  and  the  approval  of  the  Secretary 
of  the  Treasury,  upon  deposit  of  a  like  amount  of  lawful  money 
with  the  Treasurer  or  an  assistant  treasurer  of  the  United  States, 
to  provide  for  the  redemption  of  the  currency  secured  by  such 
bonds. 

Authority  to  make  the  withdrawal  should  be  substantially  in 
the  following  form,  wherein  the  bank's  agent  should  be  desig- 
nated as  the  one  authorized  to  dispose  of  the  bonds.  If  the  desig- 
nated agent  is  an  official  of  the  bank,  the  resolution  should  be 
certified  by  some  other  officer  of  the  association.  Care  should  be 
taken  to  impress  the  seal  of  the  bank  on  the  form. 


AUTHORITY   TO   WITHDRAW   BONDS. 


-,  19—. 


At  a  meeting  of  the  board  of  directors  of  the —  Bank  of 


held  at  their  banking  house, ■ ,  19 — ,  the  following  resolu- 
tion was  adopted: 

Resolved,  That  the  Comptroller  of  the  Currency  be,  and  he  is  hereby. 

authorized  to  withdraw  $ U.  S.  bonds  deposited  with  the  Treasury 

of  the  United  States  by  this  bank  to  secure  circulation,  and  described 
as  follows: 

$ of  the  loan  of 

?■ — <* of  the  loan  of 

$ of  the  loan  of 

$ of  the  loan  of 


and  that be,  and  is  hereby  authorized  to  sell,  assign,  and 

transfer  the  bonds,  and  to  appoint  one  or  more  attorneys   for  that 
purpose. 


477 

I  hereby  certify  that  the  foregoing  is  a  true  extract  from  the 
minutes  of  said   meeting. 

[SEAL  OF  BANK.]  — , 

Cashiei-,  and  Secretary  of  the  Board  of  Directors. 

Note. — The  Treasurer's  receipts  for  the  bonds  proposed  to  be  with- 
drawn must  be  forwarded  (with  this  form  properly  filed)  to  the 
Comptroller  of  the  Currency. 

When  a  bank  desires  to  retire  its  circulation  and  sell  its  bonds 
and  designates  our  company  as  its  agent  to  dispose  of  the  bonds, 
we  are  always  glad  to  deposit  for  the  bank  the  necessary  amount 
of  lawful  money,  withdraw  and  sell  the  bonds,  reimburse  our- 
selves out  of  the  proceeds  and  remit  the  balance  to  the  bank. 
The  amount  of  lawful  money  required  to  be  deposited  against 
release  of  the  bonds  is  usually  somewhat  less  than  the  amount 
of  circulation  maintained  by  the  bank,  as  proper  credit  is  given 
for  mutilated  currency  in  the  Treasury  awaiting  redemption  and 
for  the  balance  existing  in  the  redemption  fund.  In  forwarding 
to  us  resolutions  of  withdrawal,  care  should  be  taken  to  enclose 
the  United  States  Treasurer's  duplicate  receipt  for  the  bonds. 

Where  a  bank's  board  of  directors  has  passed  a  resolution  in 
the  above  form  authorizing  the  withdrawal  of  its  bonds  and  has 
appointed  an  agent  to  dispose  of  the  bonds,  this  agent  may  in 
turn  appoint  an  attorney  to  attend  to  the  business  for  him  by 
executing  a  power  of  substitution  on  the  following  form: 

Powek  of  Substitution. 

To  be  acknowledged  by  the  constituent  at  the  Treasury  Department, 
Washington,  or  before  some  one  of  the  officers  duly  authorized  by  the 
Secretary  of  the  Treasury  to  witness  assignments  of  United  States 
registered  bonds,  as  follows:  Judges  and  clerks  of  United  States 
courts;  United  States  district  attorneys;  collectors  of  customs;  collec- 
tors of  internal  revenue;  assistant  treasurers  of  the  United  States; 
executive  officers  of  federal  reserve  banks  (and  their  branches),  of 
national  banks,  and  of  other  banks  and  trust  companies  incorporated 
under  the  laws  of  any  State,  authorized  by  such  bank  or  trust  com- 
pany to  perform  acts  attested  by  the  seal  of  such  bank  or  tru3t  com- 
pany.   If  in  a  foreign  country,  acknowledgment  should  be  made  before 


478 

a  diplomatic  or  consular  representative  of  the  United  States,  or,  in 
their  absence,  a  notary  public.  In  all  cases  the  officer  must  add  his 
official  designation,  residence,  and  seal,  if  he  has  one.  If  the  acknowl- 
edgment is  taken  in  a  foreign  country  before  a  notary  public,  his  official 
character  must  be  attested  by  a  diplomatic  or  consular  representative 
of  the  United  States. 

A  Notary  Public  in  the  United  States  is  not  authorized  to  attest  this 
paper. 

Know  all  men   by  these  presents,  That 1 ,   by  virtue   of 

authority  conferred  upon  in  and  by  the  letter  of  attorney  of 

,  dated  do  hereby  substitute  and  appoint 

Attorney  for  ,  and  in  name  to  sell  and  assign 


($ )    U.    S.   — i %   Registered   Bonds,   Act  

now  standing  in  the  name  of  ■    ■ ■ on   the   books   of   the 

Treasury  Department;   hereby  ratifying  and  confirming  all  that  may 
be  lawfully  done  by  virtue  hereof. 

Witness  hand      and  seal      this  day  of  ,  19 — . 


Executed  in  the  presence  of  —  of  the—- ,  in  the  State 

of  . 

(The  seal  should  always  be  impressed.) 

§  442.  Withdrawal  Under  Sec.  18  of  Federal  Reserve  Act  — 

Section  18  of  the  Federal  reserve  act  provides  that  any  member 
bank  desiring  to  retire  the  whole  or  any  part  of  its  circulating 
notes  may  file  'with  the  Treasurer  of  the  United  States  an  appli- 
cation to  sell  for  its  account,  at  par  and  accrued  interest,  United 
States  bonds  securing  circulation  to  be  retired. 

The  Federal  Eeserve  Board  is  permitted  in  its  discretion  to  re- 
quire Federal  reserve  banks  to  purchase  such  bonds  from  the  banks 
whose  applications  have  been  filed  "with  the  Treasurer  of  the  United 
States,  the  Federal  reserve  banks,  however,  not  being  permitted  to 
purchase  an  amount  to  exceed  $25,000,000  of  such  bonds  in  any  one 
year. 

There  is  no  suggestion  at  the  present  time  that  any  acquisition 
or  purchase  of  bonds  under  this  section  is  contemplated  by  the 
Board.  As  the  prices  on  all  bonds  with  the  circulation  privilege 
is  above  par,  it  would  be  more  advantageous  to  the  banks  to  sell 
their  bonds  in  the  open  market. 


479 

§  443.  Circulation  Bonds  as  Security  for  Public  Moneys. — 
A  number  of  National  banks  are  using  2  per  cent,  government 
bonds  as  security  for  public  money  accounts,  such  as  govern- 
ment deposits  and  postal  savings  funds.  Unless  the  bonds  are 
being  held  for  some  particular  purpose,  it  would  seem  advantage- 
ous to  withdraw  and  sell  them  and  substitute  therefor  lower-priced 
and  higher  income-producing  bonds,  such  as  the  Liberty  issues. 
Liberty  bonds,  while  not  acceptable  as  security  for  circulation, 
may  be  used  to  secure  public  moneys.  Banks  may  realize  a  nice 
profit  by  making  an  exchange  of  this  kind. 

§  444.  Witnessing  Destruction  of  Mutilated  Currency — Annual 
Examination  of  Bonds.— After  a  National  bank  has  issued  cir- 
culation and  its  mutilated  notes  come  in  to  the  Treasury  for 
redemption,  the  law  requires  that  they  be  counted  and  destroj^ed 
in  the  presence  of  an  officer  or  agent  of  the  bank  who  shall  cer- 
tify to  such  destruction.  It  is  also  required  that  a  duly  authorized 
officer  or  agent  of  the  bank  make  an  annual  examination  of  the 
bonds  deposited  with  the  United  States  Treasurer  to  secure  cir- 
culation and  certify  the  results  of  such  examination.  We  per- 
form these  services  for  a  majority  of  the  National  banks  of  the 
country,  acting  under  the  following  form  of  power  of  appoint- 
ment, approved  as  to  form  by  the  United  States  Treasury. 

Form  of  Power  or  Attorney  to  National  Bank  Agent  to  "Witness 
Destruction  of  Mutilated  Notes  and  to  Examine  Bonds  of  Bank. 

Knoio  all  men   by  these  presents,   That  ,   of  Washington, 

D.   C,  are  severally  and  separately  hereby  appointed  the   true  and 

lawful  agents  of  the  National  bank  of  to 

witness  for  and  in  behalf  of  said  bank  the  destruction  of  its  circu- 
lating notes,  as  required  by  Section  5184  of  the  Revised  Statutes  of 
the  United  States  relating  to  National  banks  and  Act  of  Congress 
approved  June  23,  1874. 

Also  to  examine  and  compare  the  bonds  deposited  in  the  office  of 
the  Treasurer  of  the  United  States,  in  trust  for  said  bank,  with  the 
books  of  the  Comptroller  of  the  Currency  and  the  accounts  of  said 
Association,  as  shown  by  the  transcripts  which  may  be  furnished 
from  time  to  time;  and  if  said  bonds  are  found  to  be  correct,  and  to 
agree  with  said  books  and  transcripts,  to  execute  to  the  said  Treas- 


480 


urer  certificates  in  accordance  with  the  requirements  of  Section 
5166  of  the  Revised  Statutes  of  the  United  States  relating  to  National 
banks. 

In  witness  whereof,  I  have  hereunto  set  my  hand   and  affixed  the 
corporate  seal  of  said  bank  this  day  of ,  19 — . 


[Seal  of  Bank.] 


President  or  Cashier. 


Form  of  Statement  of  U.  S.  Bonds  Held  by  U.  S.  Treasurer. 

The  following  is  a  statement  of  the  United  States  bonds  held  by 

the  Treasurer  of  the  United  States  in  trust  for  the  National 

— bank  of  ■  on  the  day  of  ,  19 ,  from  the 

books  of  the  said  Association,  and  is  furnished  for  comparison  with 
the  records  of  the  Comptroller  of  the  Currency  and  for  making  ex- 
amination of  said  bonds  deposited  with  the  Treasurer  of  U.  S.,  as 
required  by  Section   5166,  Revised   Statutes. 


TITLE  OF  BONDS 

[Numbers  and  denominations  of  bonds  not 
required-  Give  only  total  amount  of  each 
class.] 


Amount  of   Bonds  on   Deposit  with  the 
Treasurer  of.'the  U.  S.  as  Security. 


For  Circul'g  Notes       For  Gov't  Deposits 


2  per  cent.  Consols  of  1930 

3  per  cent.  Loan  of  1908-1918 

4  per  cent.  Loan  of  1925 

2  per  cent.  Panama  Canal  Loan  1936 


Total- 


Office  of  Comptroller  of  the  Currency. 

Correct  as  to  bonds  held  for  security 
of  circulating  notes. 


Cashier. 


For  Comptroller  of  the  Currency. 


§  445.  Same — The  Five  Per  Cent.  Fund. — This  section  requires, 
in  lieu  of  the  reserve  on  circulation  abolished  by  the  preceding  sec- 
tion, a  deposit  equal  to  five  per  cent,  of  its  circulation  by  each 
bank,  in  lawful  money,  with  the  United  States  Treasurer  for  the 
redemption  of  its  circulation.  The  deposit  so  made  cannot  be 
counted  by  a  National  bank  as  a  part  of  its  lawful  reserve. 


481 

On  any  additional  circulation  issued  to  National  banks  on  a 
further  deposit  of  bonds  a  similar  deposit  is  required. 

In  estimating  the  circulation  upon  which  the  deposit  is  required, 
the  bank  must  include  all  notes  of  its  issue  in  its  possession, 
signed  or  unsigned,  as  well  as  those  in  actual  circulation. 

§  446.  Same — Keeping  Fund  Intact. — Upon  receipt  of  advices 
of  redemption,  banks  are  required  to  remit  to  the  Treasurer  to  make 
good  their  five  per  cent,  fund,  without  awaiting  the  receipt  of  the 
notes  fit  for  circulation,  or  the  certificate  of  destruction  of  the 
notes  unfit  for  circulation  as  this  fund  is  required  to  be  kept 
intact  for  further  redemption  of  notes. 

Banks  which  have  made  deposits  of  lawful  money  of  the  United 
States  for  the  retirement  of  a  portion  of  their  circulation,  and 
those  whose  notes  have  been  destroyed  without  reissue,  are  re- 
quired to  maintain  the  five  per  cent,  deposits  only  on  the  remainder. 

Banks  which  have  voted  to  go  into  liquidation  must  maintain 
the  full  five  per  cent,  deposit,  until  lawful  money  of  the  United 
States  is  deposited  for  the  retirement  of  their  outstanding  circu- 
lation. All  of  their  notes  redeemed,  whether  fit  or  unfit  for  cir- 
culation, are  charged  to  the  five  per  cent,  fund  and  destroyed. 
When  the  deposit  is  made,  the  excess  of  the  five  per  cent,  fund 
over  the  amount  required  to  cover  the  expenses  of  redemption 
and  any  tax  due  is  surrendered,  the  redemption  of  the  balance 
of  the  circulation  outstanding  having  been  provided  for  by  the 
lawful  money  deposit. 

§  447.  Same — Redemptions  of  Mutilated  Notes.-  The  redeemed 
notes  of  the  several  National  banks  are  assorted,  prepared  for 
delivery,  and  charged  to  their  five  per  cent,  accounts,  and  advices 
of  redemption  are  forwarded  to  them,  in  regular  rotation,  follow- 
ing an  alphabetical  arrangement;  and  no  departure  from  this 
practice  can  be  made  for  the  accommodation  of  any  bank. 

If  the  amount  due  does  not  exceed  the  five  per  cent,  deposit  of 
the  bank,  the  notes  fit  for  circulation  are  forwarded  to  it  by  ex- 
press, and  the  notes  unfit  for  circulation  are  delivered  to  the  Comp- 
troller of  the  Currency  on  the  same  day  that  the  advice  of  redemp- 
31 


483 

tion  is  issued.  If  the  bank's  five  per  cent,  account  is  overdrawn 
by  the  redemption,  a  sufficient  amount  of  the  notes  to  cover  the 
overdraft  is  held  until  it  is  made  good. 

'The  law  requires  the  return  of  the  redeemed  notes  fit  for  circu- 
lation to  the  respective  associations  by  which  they  were  issued, 
and  the  delivery  of  those  unfit  for  circulation  to  the  Comptroller 
of  the  Currency  for  destruction,  and  no  other  disposition  can  be 
made  of  them. 

All  of  the  redeemed  notes  of  banks  which  have  made  a  deposit 
of  United  States  notes  for  the  retirement  of  all  or  a  portion  of 
their  circulation  are  charged  to  that  deposit. 

§  448.  Same — Remittances. — The  Department  Begulations  in 
effect  at  the  date  of  this  publication,  but  subject  to  amendment 
at  any  time,  provide  for  reimbursement  of  the  five  per  cent,  fund 
in  any  of  the  following  ways : 

1.  By  a  check  on  Boston,  New  York,  Baltimore,  New  Orleans, 
Chicago,  St.  Louis  or  San  Francisco,  collectible  through  the  Clear- 
ing House,  payable  to  the  assistant  treasurer  of  the  United  States 
in  the  city  on  which  drawn  and  forwarded  direct  to  such  officer. 
( Drafts  on  subtreasury  cities  should  not  be  forwarded  to  the  Treas- 
urer of  the  United  States  at  Washington,  D.  C.) 

2.  By  a  deposit  of  lawful  money  with  any  assistant  treasurer  of 
the  United  States.  (This  does  not  contemplate  direct  shipments 
of  currency  to  subtreasuries  and  banks  not  located  in  a  subtreasury 
city  should  make  such  deposits  through  their  correspondents.) 

3.  By  a  remittance  of  lawful  money  direct  to  the  Treasurer  of 
the  United  States  in  Washington,  D.  C. 

§  449.  Ledger  Accounts  Covering  Circulation.—  The  circulating 
notes  of  a  National  bank  require  two  accounts — a  "circulation" 
account  and  a  "five  per  cent,  fund"  account. 

§  450.  The  "Circulation"  Account.— 1.  Credit  this  account  with 
circulation  received  from  the  Comptroller  on  the  first  and  any 
subsequent  United  States  bond  deposit  made  by  the  bank  with 
United  States  Treasurer. 


483 

2.  When  notices  are  received  from  the  United  States  Treasurer 
of  redemptions  made,  debit  this  account  with  the  amounts  re- 
ported by  him.  Credit  the  "five  per  cent,  fund"  account.  See 
par.  2  below. 

3.  When  the  Treasurer  returns  notes  redeemed  as  fit  for  cir- 
culation or  when  the  Comptroller  sends  new  notes  for  mutilated 
notes  redeemed  and  destroyed,  credit  this  account  with  amount 
of  these  notes. 

By  keeping  this  "circulation"  account  the  bank's  books  will  al- 
ways show  the  amount  of  circulation  issued  to  the  bank.  This 
item  is  called  for  in  the  regular  reports  to  the  Comptroller  of  the 
Currency  and  is  also  the  basis  for  semi-annual  tax  on  average 
amount  of  notes  in  Circulation — any  notes  on  hand  not  in  circu- 
lation, even  though  counted  in  the  cash,  are  not  subject  to 
taxation. 

§  451.  The  "Five  Per  Cent.  Fund"  Account. —  1.  Debit  this  ac- 
count with  the  remittance  to  the  United  States  Treasurer,  re- 
quired by  law,  for  the  "five  per  cent,  fund,"  viz.:  an  amount 
equal  to  five  per  cent,  of  the  circulation  issued  to  the  bank. 

2.  When  notices  of  redemptions  are  received  from  the  Treas- 
urer, credit  the  amounts  redeemed  to  this  account.  Debit  the 
"circulation"  account.     See  par.  2  above. 

3.  When  the  bank  makes  remittances  to  cover  redemptions  re- 
ported by  the  United  States  Treasurer  to  reimburse  the  "five 
per  cent,  fund"  for  amounts  paid  out  by  the  Treasurer,  debit 
the  "five  per  cent,  fund"  account. 

The  Treasurer  calls  for  remittances  when  he  advises  banks  of 
redemptions,  and  states  how  remittances  can  be  made,  either  by 
check  or  lawful  money  deposits.  We,  the  publishers  of  this  work, 
make  these  deposits  with  the  Treasurer  for  a  number  of  the  banks 
we  represent  and  without  charge,  the  banks  sending  us  New  York 
or  other  Eastern  exchange  for  the  amount  required.  The  redemp- 
tions cover  two  kinds  of  notes,  those  in  good  condition,  called 
"fit  for  circulation,"  and  others  mutilated  or  worn,  called  "unfit 
for  circulation";  the  former  are  returned  to  the  issuing  banks. 
The  Treasurer  will  not  deliver  these  notes  to  an  attorney  or  send 


484 

to  a  correspondent,  holding  that  the  law  requires  direct  return  to 
the  bank  of  issue.  (The  Treasurer  prepays  the  charges  on  such 
notes  and  assesses  the  banks  annually  pro  rata  for  the  total 
amount  expended.)  The  notes  "unfit  for  circulation"  are  sent 
to  the  Comptroller  of  the  Currency  for  destruction  and  issue  of 
new  currency  for  amount  destroyed,  to  be  forwarded  by  the  Comp- 
troller direct.  The  remittance  of  new  currency  may  be  short 
on  account  of  the  redemption  of  a  half  note;  in  such  case  the 
account  on  the  bank's  books  will  show  the  difference,  which  stands 
to  the  credit  of  the  bank  on  the  Comptroller's  books  until  another 
redemption  of  a  half  note.  If  a  bank  wishes,  it  can  cut  a  note 
and  forward  half  for  redemption  to  add  to  the  credit  of  the  for- 
mer half  redeemed  in  order  to  get  credit  for  a  full  note,  and  carry 
the  other  half  of  note  cut,  in  cash,  until  another  redemption  of  a 
half,  when  the  one  held  in  cash  can  be  sent  on  to  remedy  the  mat- 
ter again. 

The  Comptroller  makes  no  record  of  the  several  series  of  issue 
or  numbers  on  notes  destroyed,  but  only  of  denominations  and 
amounts,  as  noted  in  certificate  of  destruction  sent  to  the  bank; 
from  these  certificates  may  be  kept  a  record  of  the  amounts  of  each 
denomination  destroyed,  if  desired;  further,  as  new  circulation 
is  received  from  the  Comptroller  from  time  to  time  it  may  be 
well  to  keep  a  record  of  numbers  of  the  notes,  the  bank's  number 
(lower  left-hand  corner  of  notes)  and  the  Treasury  number  (op- 
posite right-hand  corner). 

Under  Section  8,  Act  of  July  12,  1882,  National  banks  making 
deposits  of  lawful  money  for  the  retirement  in  full  of  their  cir- 
culation are,  at  the  time  of  the  deposit,  assessed  for  the  cost  of 
transporting  and  redeeming  the  notes  then  outstanding,  a  sum 
equal  to  the  average  cost  of  the  redemption  of  National  bank 
notes  during  the  preceding  year,  and  any  notes  redeemed  during 
the  year  then  current  are  included  in  the  assessment. 

§  452.  Method  of  Verifying  Remittances  of  Mutilated  Notes.— 
Packages  of  National  bank  notes  received  for  redemption  at  the 
Treasury  Department  are  charged  to,  and  receipted  for,  by  the 
counters,  with  the  seals  unbroken;  and  the  counters  are  required 


485 

to  count,  return,  and  obtain  a  receipt  for  the  contents  of  each 
package  before  receiving  another.  An  inventory  of  the  contents 
according  to  the  amounts  marked  on  the  straps  is  made  imme- 
diately on  opening  the  package,  and  the  contents  of  each  strap 
are  separately  proved.  Discrepancies  are  noted  on  the  proper 
strap,  which  is  returned  to  the  owner.  "Shorts"  are  at  once  re- 
ported and  verified  by  the  teller  in  charge.  The  packages  are 
charged  to  the  counters  by  the  amounts  on  the  wrappers,  and  any 
discrepancy  between  these  amounts  and  the  contents  is  reported 
as  an  "over"  or  a  "short"  by  inventory. 

§  453.  Disposition  of  Notes  Redeemed. — The  notes  are  then  as- 
sorted and  examined  by  experts.  The  currency  fit  for  circulation 
is  sent  to  the  several  banks  of  issue,  and  that  which  is  unfit  for 
circulation  is  cancelled  by  cutting  off  the  signatures  of  the  presi- 
dent and  cashier,  then  done  up  in  packages  and  delivered  daily 
to  the  Comptroller  of  the  Currency,  who  has  it  examined,  counted, 
and  schedules  made  for  the  banks,  of  what  is  to  be  destroyed 
each  da}'.  After  this  count  the  notes  are  then  delivered  to  the 
agent  of  the  bank,  who  examines  and  counts  them  and  verifies  the 
amount.  The  package  is  then  checked  off  from  the  schedules  in 
the  presence  of  four  witnesses,  representing  the  Secretary  of  the 
Treasury,  the  United  States  Treasurer,  the  Comptroller  of  the 
Currency  and  the  bank  the  notes  of  which  are  to  be  destroyed. 
It  is  then  deposited  in  a  box  and  locked,  then,  accompanied  by 
the  witnesses,  taken  to  the  macerator  and  ground  into  pulp.  New 
currency  is  sent  the  banks  for  the  same.  Frequently  notes  are 
pronounced  unfit  for  circulation  though  apparently  in  good  con- 
dition, but  they  are  notes  so  thoroughly  worn  that  they  would 
bear  but  little  further  use,  and  the  expense  of  new  notes  is  so  very 
small  that  it  is  not  a  consideration. 


§  454.  Issue  of  New  Circulating  Notes. — The  issue  of  new  cir- 
culating notes  to  National  banks  is  under  the  control  of  the  Comp- 
troller of  the  Currency,  and  all  shipments  of  new  notes  are  made 
bv  his  office  direct  to  the  bank. 


486 

§  455.  Legal  Tender  and  Lawful  Money — What  Is.— Gold  coin, 
standard  silver  dollars,  subsidiary  silver,  minor  coins,  United 
States  notes  and  Treasury  notes  of  1890  have  the  legal  tender 
quality  as  follows:  Gold  coin  is  legal  tender  for  its  nominal 
value  when  not  below  the  limit  of  tolerance  in  weight;  when  he- 
low  that  limit  it  is  legal  tender  in  proportion  to  its  weight;  stan- 
dard silver  dollars  and  Treasury  notes  of  1890  are  legal  tender 
for  all  debts,  public  and  private,  except  where  otherwise  expressly 
stipulated  in  the  contract;  subsidiary  silver  is  legal  tender  to  the 
extent  of  $10,  minor  coins  to  the  extent  of  25  cents,  and  United 
States  notes  for  all  debts,  public  and  private,  except  duties  on 
imports  and  interest  on  the  public  debt.  Gold  certificates  have 
recently  been  made  legal  tender.  Silver  certificates  and  National 
bank  notes  are  non-legal-tender  money.  Silver  certificates,  how- 
ever, are  receivable  for  all  public  dues,  and  National  bank  notes 
are  receivable  for  all  public  dues  except  duties  on  imports,  and 
may  be  paid  out  for  all  public  dues,  except  interest  on  the  public 
debt.  The  term  "lawful  money"  is  understood  to  apply  to  every 
form  of  money  which  is  endowed  by  law  with  the  legal  tender 
quality.     (See  Opinions  of  Attorneys-General,  vol.  17,  p.  123.) 

§  456.  Tax  on  Circulation — Form  for  Making  Return. — Na- 
tional banks  are  required,  under  Eev.  Stat.,  Sec.  5214,  amended 
by  Act  March  3,  1883,  and  Act  of  March  14,  1900,  to  pay  semi- 
annual duty  on  their  notes  in  circulation,  and  in  Section  5215 
it  is  made  the  duty  of  the  Treasurer  of  the  United  States  to  pre- 
scribe the  form  for  making  return  by  each  National  Bank  of  the 
average  amount  of  its  notes  in  circulation  for  each  half  year  for 
the  purpose  of  assessment.     The  following  is  the  form: 

Semi-annual  Return  of  Circulation  Subject  to  Duty. 

Return  of  the  average  amount  of  Notes  of  the  • National 

Bank  of  — ,  State  of  — i ,  in  circulation  for  the 


six  months  ending  the  31st  day  of  — ■ — ,  19 — ,  with  the  duty  thereon, 
made  pursuant  to  the  provisions  of  Section  5215,  Revised  Statutes  of 
the  United  States,  and  the  act  of  March  14,  1900,  in  order  to  enable 
the  Treasurer  of  the  United  States  to  assess  the  duty  on  circulation 
imposed  by  Section  5214  of  said  statutes,  as  amended  by  Section  1 


487 

of  "An  act  to  reduce  internal  revenue  taxation,  and  for  other  pur- 
poses," approved  March  3,  1883,  and  the  said  act*  of:  March  14,  1900. 

Average  amount  of  notes  in  circulation  for  the 
period  based  on  XJ.  S.  two  per  cent.  Consols  of 
1930,  and  U.  S.  bonds  of  Panama  Canal  loan.        $ 

Duty  on  average  amount  of  notes  in  circulation  based  on 
U.  S.  two  per  cent.  Consols  of  1930,  and  U.  S.  bonds  of 
Panama  Canal  loan,  at  one-fourth  of  one  per  cent.,  $ ■    ■ 


Average  amount  of  notes  in  circulation  for  the 
period  based  on  any  or  all  other  U.   S.  Bonds,        $ 

Duty  on  average  amount  of  notes  in  circulation  based  on 
all  other  U.  S.  Bonds  at  one-half  of  one  per  cent.,  $- 


Total  amount  of  duty, 


I,   — ' ,   of   the   above-named   National   bank,   do 

solemnly  swear   that  the  above   is   a  true  statement  of  the  average 
amount  of  notes  of  said  bank  in  circulation  for  the  time  named. 


Subscribed  and  sworn  to  before  me,  this  — — ■ day  of 

19—. 


(seal) 


§  457.  Same — Requirement  and  Penalty  for  Failure.— This  re- 
turn, with  each  blank  filled  with  the  proper  amount  as  indicated, 
and  subscribed  and  sworn  to  by  the  president  or  cashier  of  the 
bank  before  an  officer  qualified  to  administer  oaths,  must  be  sent 
to  the  Treasurer  of  the  United  States  within  ten  days  from  the 
first  days  of  January  and  July,  respectively,  in  each  year,  under 
a  penalty  of  two  hundred  dollars,  and  payment  must  be  made 
within  the  months  of  January  and  July. 

§  458.  Same — How  Payment  Made. — Payment  may  be  made  by 
deposit  of  the  amount  of  duty  to  the  credit  of  the  Treasurer  of 
the  United  States,  with  him,  or  with  any  Assistant  Treasurer, 
Federal  reserve  bank,  or  National  bank  depositary.  Triplicate 
certificates  should  be  issued  therefor,  the  "original"  of  which  must 


488 

be  forwarded  to  the  Secretary  of  the  Treasury,  the  "duplicate" 
to  the  Treasurer,  and  the  "triplicate"  held  by  the  bank  making 
the  deposit  as  its  voucher  therefor.  The  certificate  must  state 
that  the  deposit  is  on  account  of  semi-annual  duty.  No  other 
receipt  will  be  issued. 

If  there  is  no  depositary  convenient,  payment  may  be  made  by 
draft  on  New  York  (collectible  through  the  Clearing  House)  to 
the  order  of  the  Treasurer,  or  by  remittance  to  him  in  lawful 
money  of  the  United  States,  or  notes  of  National  banks,  for  which 
the  Treasurer  will  issue  his  certificate  of  deposit,  and  send  the 
duplicate  to  the  bank. 

§  459.  Same — Percentage  Assessed  and  Period.—  The  duty  on 
circulating  notes  is  one-half  of  one  per  centum  on  the  average 
amount  outstanding  for  the  six  months  based  on  all  United  States 
bonds,  except  the  two  per  cent,  bonds;  on  notes  based  on  two 
per  cent,  bonds  the  duty  is  one-fourth  of  one  per  cent,  on  the 
average  amount  of  notes  in  circulation  for  the  six  months. 

Liability  begins  on  the  first  days  of  January  and  July  in  each 
year,  unless  a  bank  had  at  that  time  no  circulation  outstanding, 
in  which  case  it  begins  with  the  date  of  the  first  issue  of  notes, 
and  terminates  on  the  30th  day  of  June  or  the  31st  day  of  De- 
cember (as  the  case  may  be),  date  of  commencement  and  termi- 
nation both  included. 

Banks  that  have  before  made  returns  will  report  for  the  full 
semi-annual  term  of  181,  182,  or  184  days,  as  the  case  may  be; 
and  banks  that  have  not  before  made  returns  will  report  their 
circulating  notes  from  and  including  the  date  of  their  first  issue. 

§  460.  Same — Computing  Amount.—  To  ascertain  the  average 
amount,  add  together  the  daily  balances  of  the  notes  in  circula- 
tion from  the  proper  date  of  the  commencement  of  the  liability 
to  duty  (including  for  each  Sunday  and  holiday  the  balance  of 
the  preceding  business  day),  to  and  including  the  30th  day  of 
June,  or  the  31st  day  of  December,  as  the  case  may  be.  The  ag- 
gregate of  daily  balances  for  the  first  six  months  of  any  year 
will  be  divided  by  181 — the  number  of  days  from  January  1 


489 

to  June  30,  except  in  leap  year,  Avhen  the  sum  will  be  divided 
by  182.  The  aggregate  of  daily  balances  for  the  last  six  months 
of  any  year  will  be  divided  by  184 — the  number  of  days  from 
July  1  to  December  31. 

Banks  not  making  daily  statements,  and  obtaining  their  aver- 
ages from  weekly  statements,  should  add  together  the  weekly  bal- 
ances, including  for  each  day  in  any  fractional  part  of  a  week 
one-seventh  of  the  weekly  balance  next  preceding  such  fractional 
part.  The  aggregate  of  balances  for  the  first  six  months  of  any 
year  will  be  divided  by  the  number  of  weeks  from  January  1  to 
June  30  (25  and  six-sevenths  or  26,  as  the  case  may  be).  The 
aggregate  of  balances  for  the  last  six  months  will  be  divided  by 
26  and  two-sevenths — the  number  of  weeks  from  July  1  to  De- 
cember 31. 

Banks  having  circulation  subject  to  duty  for  a  period  less  than 
a  half  year,  which  make  their  estimates  from  daily  balances,  will 
divide  the  aggregate  of  the  balances  of  the  item  for  the  time  for 
which  it  is  liable  to  duty  by  the  number  of  days  in  the  half  year; 
and  banks  which  make  their  estimates  from  weekly  balances,  by 
the  number  of  weeks  and  the  fractions  thereof  in  the  half  year. 
The  quotient  thus  found  will  be  the  average  amount  subject  to 
duty  for  each  six  months,  respectively,  and  should  be  entered  in 
the  return,  and  duty  computed  thereon  at  the  full  semi-annual 
rate. 

A  bank  retiring  its  circulation,  or  any  portion  of  it,  is  relieved 
from  duty  on  the  amount  retired  from  the  time  of  making  the 
deposit  of  lawful  money  to  redeem  the  same. 

A  bank  which  has  gone  into  liquidation,  in  making  its  final  re- 
turn, must  estimate  duty  upon  circulation  to  the  time  of  making 
the  deposit  of  lawful  money  with  the  Treasurer  of  the  United 
States  to  redeem  the  same.  The  item  should  be  averaged  for  the 
full  six  months,  according  to  the  foregoing  rule,  and  the  duty 
calculated  at  the  prescribed  rate.  The  amount  thus  determined! 
is  the  correct  proportion  for  the  time  for  which  the  item  is  liable. 

§  461.  Tax  Required  Only  on  Actual  Circulation.—  It  should 
be  noted  that  the  provision  of  the  Revised  Statutes  as  to  duty 


490 

on  the  circulation  of  National  banks  applies  only  to  the  currency 
of  National  banks  actually  in  circulation;  that  is,  it  does  not 
include  circulating  notes  of  the  bank  received  from  the  Comp- 
troller of  the  Currency,  or  in  transit  from  him,  which  have  not 
been  put  into  circulation  by  the  bank,  nor  does  it  include  the 
circulating  notes  redeemed  by  the  United  States  Treasurer,  which 
have  not  been  returned  to  the  bank,  and  put  in  circulation  again, 
or  notes  redeemed  and  destroyed  for  which  new  circulating  notes 
are  issued  until  such  new  notes  are  received  and  put  in  circulation. 


CHAPTEE  VI. 

Consolidation  or  National  Banks. 

Section  462.  Provisions  of  the  Law. 

4'63.  Consolidation  of  National  Bank  With  State  Bank. 

464.  Procedure. 

465.  Argument  Between  Directors. 

466.  Certificate  of  Increase  in  Capital  and  Payment  of 

Cash. 

467.  Heeting  and  Resolution  of  Shareholders. 

468.  Certificate  of  Comptroller. 

469.  Transfer  of  Bonds  and  Other  Assets. 

470.  Dissenting  Shareholders — Eights  of. 

471.  Services  of  an  Attorney. 

472.  Liquidation  for  Consolidation — Methods  of  Consoli- 

dation. 

473.  Same — Form  of  Eesolutions. 

474.  Same — Procedure. 

§  462.  Provisions  of  the  Law.—  The  Act  of  November  7,  1918, 
provides  an  easy  and  simple  method  whereby  two  or  more  Na- 
tional banks  located  in  the  same  place  may,  with  the  Comptroller's 
approval,  consolidate  into  one  under  the  charter  of  either  and 
on  such  terms  and  conditions  as  may  be  lawfully  agreed  upon 
by  the  majority  of  the  directors  of  each  bank  and  ratified  and 
confirmed  by  at  least  a  two-thirds  vote  of  the  stockholders  of  each 
association.     (The  full  text  of  this  act  is  given  under  §  33.) 

§  463.  Consolidation  of  National  Bank  With  State  Bank. — 
The  Act  of  November  7,  1918,  applies  only  to  cases  where  all 
the  institutions  desiring  to  consolidate  are  National  banks,  and  it 
is  impossible  to  consolidate  thereunder  a  National  bank  with  a 
State  bank  or  trust  company.    If  a  State  bank  or  trust  company 

491 


492 

desires  to  consolidate  with  a  National  bank  and  avail  itself  of 
the  privileges  of  this  act,  it  must  first  convert  into  a  National 
bank.     This  can  usually  be  done  without  much  difficulty. 

§  464.  Procedure. — National  banks  proposing  to  consolidate 
under  this  act  should  advise  the  Comptroller,  outlining  the  gen- 
eral plan  under  consideration  and  requesting  his  approval.  After 
the  Comptroller  has  approved  the  general  plan  and  furnished 
forms  and  instructions,  the  directors  of  both  banks  should  enter 
into  an  agreement  and  call  a  special  meeting  of  the  shareholders 
to  obtain  ratification.  A  copy  of  the  agreement  should  then  be 
sent  to  the  Comptroller  and  his  approval  obtained  before  the 
shareholders'  meetings.  If  the  shareholders  of  both  banks  ratify 
and  confirm  the  agreement,  certified  copies  of  the  resolutions  should 
be  sent  to  the  Comptroller,  who  will  then  issue  his  certificate 
approving  the  consolidation.  The  actual  consolidation  may  then 
be  completed.  No  deed  or  other  transfer  is  necessary  or  required. 
The  new  bank  by  the  mere  operation  of  the  law  holds  and  enjoys 
all  the  rights  and  property  of  the  consolidating  banks. 

§  465.  Agreement  Between  Directors. — As  soon  as  forms  and 
instructions  are  received  from  the  Comptroller,  the  majority  of 
the  directors  of  each  institution  should  enter  into  an  agreement 
covering  the  terms  of  consolidation.  If  the  model  form  of  agree- 
ment does  not  include  all  the  points  that  it  may  be  desirous  to 
cover,  the  Comptroller  should  be  advised  of  the  desired  changes 
and  additions  and  his  approval  obtained  to  the  amended  form. 
The  following  is  the  model  form  of  agreement: 

AGBEEMENT    OF     CONSOLIDATION     BETWEEN     THE    AND     THE 

UNDER   THE   TITLE   OF   THE  ' ' — ! — 


This  agreement  made  between  the  and   the 


,  each  located  in  ,  and  each  acting  pursuant  to  a  resolu- 
tion of  its  board  of  directors  and  by  a  majority  of  said  boards,  pur- 
suant to  the  authority  given  by,  and  In  accordance  with  the  pro- 
visions of  an  act  of  the  Congress  of  the  United  States  entitled,  "An 
act  to  provide  for  the  consolidation  of  national  banking  associa- 
tions," approved  on  the  7th  day  of  November,  1918,  witneBseth  as 
follows: 


493 

1.  The   — i — i —   —    (hereafter   referred    to    as   the   )    and 

the  — i (hereafter  referred  to  as  the  — < )    are  hereby 

consolidated  under  the  charter  of  the  said  first-named  association  as 
hereby  modified. 

2.  The  name  of  the  consolidated  association  shall  be  " — ." 

3.  The  amount  of  capital  stock  of  the  consolidated  association  shall 

be  ■  dollars   ($ ),  divided  into  — • ■  shares   ( > — )   of 

one  hundred  dollars  ($100.00)  each,  subject  to  the  right  to  change 
the  amount  of  said  capital  hereafter  as  is  now  or  shall  hereafter  be 
authorized  by  law.    On  the   date  of  consolidation   its  surplus   shall 

be  dollars    ($ — ' ).    Said   capital,   surplus,   and    undivided 

profits  at  the  date  of  consolidation  shall  then  aggregate  dol- 
lars   ($ ! — ).    Of   this    capital    ( ' — ■)    shares    shall    be 

allotted    to   the    present   shareholders    of   the   ,    being 

shares  for  each  share  now  held  by  them,  and  ( )   shall 

be  allotted  to  the  present  shareholders  of  the  ,  being  

for  each  share  now  held  by  them.  The  assets  contributed  by  each 
of  said  associations  shall,  upon  the  effective  date  of  the  consolida- 
tion, be  passed  upon  and  be  acceptable  to  a  committee  of  six,  three 
to  be  appointed  by  the  board  of  directors  of  each  association,  and 

the  shareholders  of  the  present shall  furnish  net  assets  above 

all  liabilities  of  that  association  equal  to  of  the  capital  and 

surplus  of  the  consolidated  bank,  and  the  present  shareholders  of  the 

shall  furnish  net  assets  equal  to  — — — .    Such  assets  of  either 

association  as  it  shall  not  consider  desirable  to  carry  into  the  con- 
solidation, or  as  shall  not  be  necessary  to  make  up  its  contribution, 
to  the  capital,  surplus,  and  undivided  profits,  as  aforesaid,  shall  be 
transferred  by  it,  before  the  effective  date  of  the  consolidation,  to  a 
trustee  or  trustees  for  the  ultimate  benefit  of  its  shareholders,  upon 
whatever  terms  and  under  whatever  conditions  shall  be  deemed 
proper.  In  the  event  that  there  is  not  sufficient  net  assets  in  either 
association  to  make  good  its  proportion  of  capital  and  surplus  of 
($ — •)  herein  provided  for,  the  shareholders  of  the  asso- 
ciation not  having  sufficient  assets  to  make  good  its  proportion  shall 
pay  the  difference  in  cash. 

4.  The  directors  of  the  consolidating  associations  shall  constitute 
the  board  of  directors  of  the  consolidated  bank  for  the  remainder  of 
the  current  year, 

5.  This  consolidation  shall  become  effective  when  it  shall  have 
been  ratified  and  confirmed  by  the  affirmative  vote  of  the  share- 
holders of  each  of  said  associations  owning  at  least  two-thirds  of  its 
capital  stock  outstanding,  at  a  meeting  to  be  held  pursuant  to  a  call 
by  the  directors  heretofore  made,  and  shall  have  been  approved  by 
the  Comptroller  of  the  Currency  of  the  United  States. 


494 

Witness  the  signatures  and  seals  of  said  associations,  this  —  day 

of  ,  19 — ,  each  hereunto  set  by  the  president  and  attested  by 

its  cashier,  pursuant  to  a  resolution  of  its  board  of  directors,  acting 
by  a  majority  thereof,  and  witness  the  signatures  hereto  of  a  majority 
of  each  of  said  boards  of  directors. 

The  ■ , 

By , 

Attest: 

President. 


Cashier. 


Directors  of  The  National  Bank  of 


The 
By 
Attest: 


President. 


Cashier. 


Directors  of  The  ■ National  Bank  of 

State  of  , 


County  of 


On  this  day  of  — i ,  192 — ,  before  me,  a  notary  public  for 

the  State  and  county  aforesaid,  personally  came  ,  as  president, 

and  ,  as  cashier  of  the  — National  Bank  of  ,  and 

each  in  his  said  capacity  acknowledged  the  foregoing  instrument  to 
be  the  act  and  deed  of  said  association  and  the  seal  affixed  thereto 

to  be  its  seal;   and  came  also , ,  , 

being  a  majority  of  the  board  of  directors  of  said  association,  and 
each  of  them  acknowledged  said  instrument  to  be  the  act  and  deed 
of  said   association   and   of  himself   as   a  director   thereof. 

Witness  my  official  seal  and  signature  this  day  and  year  aforesaid. 


Notary  Public,  1  County. 


My  commission  expires 


State  op 


County  of  ,  ss: 

On  this  day  of  ,  192 — ,  before  me,  a  notary  public  for 

the  State  and  county  aforesaid,  personally  came  ,  as  president, 


495 

and  ,  as  cashier  of  the  — National  Bank  of  ,  and 

each  in  his  said  capacity  acknowledged  the  foregoing  instrument  to 
be  the  act  and  deed  of  said  association  and  the  seal  affixed  thereto 

to  be  its  seal;   and  came  also  ,  ,  , 

being  a  majority  of  the  board  of  directors  of  said  association,  and 
each  of  them  acknowledged  said  instrument  to  be  the  act  and  deed 
of  said  association  and  of  himself  as  a  director  thereof. 
Witness  my  official  seal  and  signature  this  day  and  year  aforesaid. 


Notary  Public, County. 

My  commission  expires  ■ — — i — . 

§  466.  Certificate  of  Increase  in  Capital  and  Payment  of  Cash. 
— If  the  agreement  of  consolidation  provides  for  an  increase  in 
capital  of  an  amount  in  excess  of  the  total  capital  of  the  exist- 
ing banks,  or  if  there  is  a  provision  requiring  the  paying  in  of 
cash  in  addition  to  the  transfer  of  assets  to  equalize  the  value  of 
the  capital  stock,  or  for  some  other  reason,  a  certificate  to  that 
effect  must  be  furnished,  sworn  to  by  the  president  or  cashier. 
The  increase,  of  course,  must  be  paid  in  cash  and  the  certificate 
must  so  state. 

The  following  is  the  form  of  certificate : 

Certificate  of  Payment  of  Capital  in  Connection  With  Consolidation 
of  the  National  Bank  of 

and  the  National  Bank  of 

Whereas,   a   contract   was   entered   into   on    the  day   of 

,   19    ,   between   The  National   Bank   of 

,  and  The  National  Bank  of  , 

providing  for  the  consolidation  of  these  two  associations   under  the 

charter  of  and  under  the  title  of  " 

Whereas,  Said  contract  provided  that  the  capital  of  the  consolidated 
association  should  be  %  ,  and  the  Surplus  %  and 

that  the  shareholders  of  The  National  Bank  should  fur- 

nish net  assets  above  all  liabilities  of  that  association,  equal  to 
%  of  said  capital  and  surplus,  and  that  the  shareholders  of 

The  National  Bank  should   furnish   net  assets   equal  to 

$  of  said  capital  and  surplus. 

And  Whereas,  Said  contract  further  provided  that  in  the  event  there 
is  not  sufficient  net  assets  in  either  institution  to  make  good  its  pro- 
portion of  tbe  capital  and  surplus  of  $  ,  the  shareholders 


496 

of  the  association  not  having  sufficient  assets  to  make  good  its  pro- 
portion shall  pay  the  difference  in  cash. 

Now,  It  is  hereby  certified  that  the  shareholders  of  The 
National  Bank  have  furnished  net  assets,  above  all  liabilities,  amount- 
ing to  ($  ),  and  have  paid  in  cash  the 
sum  of  ($  ),  equal  to  $  of 
the  capital  and  surplus  of  the  consolidated  bank;  and  that  share- 
holders of  The  National  Bank  have  furnished  net  assets, 
above  all  liabilities,  amounting  to  (?  ), 
and  have  paid  in  cash  the  sum  of  ($  ), 
equal  to  $  of  the  capital  and  surplus  of  the  consolidated 
bank. 

seal  of 

bank  President  or  Cashier 

Subscribed  and  sworn  to  before 
me  this  day  of 

A.  D.  19     . 


Notary  Public 
Notary  Public 

County.     My    commission 
pires 


In  the  event  that  the  capital  of  the  consolidated  bank  is  less 
than  the  combined  capital  of  the  existing  banks,  it  will  be  neces- 
sary to  secure  the  consent  of  the  Federal  Reserve  Board  to  the 
reduction,  as  in  other  cases  of  reduction  of  capital  by  National 
banks. 

§  467.  Meeting  and  Resolution  of  Shareholders. — After  the 
agreement  of  consolidation  has  been  signed  by  a  majority  of  the 
directors  of  each  bank,  acknowledged  before  a  notary  public,  and 
its  provisions  approved  by  the  Comptroller,  it  must  be  submitted 
to  the  shareholders  of  both  banks  at  a  special  meeting  called  for 
that  purpose.  Notice  of  the  meeting  of  the  shareholders  of  each 
association  to  vote  upon  this  agreement  must  be  published  for 
four  consecutive  weeks  in  some  newspaper  published  in  the  place 
where  the  banks  are  located,  and  if  no  newspaper  is  published 
in  that  place,  then  in  a  paper  published  nearest  thereto.  This 
notiee  must  state  the  time,  place  and  object  of  the  meeting.  In 
addition  to  this  published  notice,  the  law  requires  the  same  notice 
to  be  sent  to  each  shareholder  of  record  by  registered  mail  at  least 


497 

ten  days  prior  to  the  meeting.  The  shareholders'  meetings  may 
be  called  and  held  at  the  same  time  and  thus  save  delay.  The 
directors'  agreement  must  be  ratified  and  confirmed  by  the  affirma- 
tive vote  of  the  shareholders  of  each  bank  owning  at  least  two- 
thirds  of  its  capital  stock.  The  following  is  the  form  of  resolu- 
tion for  adoption  by  the  shareholders : 

RESOLUTION    PROVIDING    FOR    THE    CONSOLIDATION    OF    THE    NATIONAL 

BANK    OF    ,    NO.    ,    AND    THE    — I NATIONAL    BANK 

OF ,     NO.    . 

At  a  meeting  of  the  shareholders  of  the  1  held  on  — — ,  at 

the  hour  of  ,  at  the  banking  house  of  the  association  in  the 

town  or  city  of  ,  notice  having  been  given  of  the  time,  place 

and  object  of  the  meeting  for  four  consecutive  weeks  in  the  , 

a  newspaper  published  in  the  place  where  said  association  is  located, 
and  notice  having  been  sent  to  each  shareholder  of  record  by  regis- 
tered mail  at  least  10  days  prior  to  said  meeting,  the  following  reso- 
lution was  adopted  by  the  vote  of  shareholders  of  the  ,  owning 

at  least  two-thirds  of  its  outstanding  capital  stock: 

"Whereas,  the  directors  of  the  ,  located  in  the  town  or  city 

of  ,  county  of  ,  and   State  of  ,  have  entered  into 

an  agreement  with  the  board  of  directors   of  the  ,  located  in 

tbe  town  or  city  of  ,  county  of  ,  and   State  of  , 

providing    for    the    consolidation    of    the    two    associations    into    one 

national  bank  under  the  charter  of  the  ,  and  under  the  title 

of  ' '  in  accordance  with  the  provisions  of  the  act  of  Congress 

approved  November  7,  1918,  said  agreement  entered  into  between 
the  two  boards  of  directors  reading  as  follows:  [There  must  be 
inserted  here  in  full  an  exact  copy  of  the  agreement  between  the 
directors  of  the  banks.  The  names  of  all  the  directors  who  sign  the 
agreement  and  the  officers  before  whom  they  acknowledge  it  should 
be  typewritten.]     Therefore  be  it 

"Resolved,  That  the  agreement  entered  into  between  the  directors 

of  the  National  Bank  of  and  the  1 —  National  Bank 

of  be  ratified  and  confirmed,  and  that  these  banks  be  con- 
solidated  under  the   charter   of   the  ,   and    under   the   title   of 

' — ■ ,'   with   capital   stock  of  ($ ),  such  consolidation 

to  become  effective  immediately  upon  its  approval  by  the  Comp- 
troller of  the  Currency." 

The  foregoing  resolution  was  adopted  by  the  following  vote  repre- 
senting two-thirds  or  more  of  the  capital  stock  of  the  association 
outstanding,  no  director,  other  officer,  or  employee  having  acted  as 
proxy. 


498 
Stock   voted   for   resolution. 


Name  of  shareholder. 


Residence. 


Name  of  Proxy. 


No.  of  shares. 


Stock   voted   against   resolution. 


Name  of  shareholder. 


Residence. 


Name  of  Proxy. 


No.  of  shares. 


BECAPITULATION. 

Total  number  of  shares  voted   in  favor  of  resolution 

Total   number   of   shares   voted    against    resolution 

Total    number   of   shares    represented    at   meeting 

Total   number   of   shares    of    capital    stock ■ 

I  hereby  certify  that  this  is  a  true  and  correct  report  of  the  vote 
and  of  the  resolution  adopted  at  a  meeting  of  the  shareholders  of 
this  bank  held  on  the  date  mentioned. 

[seal  of  bank.]  , 

President. 

Subscribed  and  sworn  to  before  me  this  day  of ,  A.  D. 

192—. 

[seal  of  notaby.]  , 

Notary   Public,   County. 

My  commission   expires  — ■ . 

Certified  copies  of  the  resolutions  of  ratification  and  confirmation 
should  be  sent  to  the  Comptroller.  It  is  always  advisable  to  adjourn 
the  shareholders'  meetings  on  call  of  the  chairman  in  order  that  they 
may  be  reassembled  without  delay  in  the  event  that  the  Comptroller 
requires  further  action. 

§  468.  Certificate  of  Comptroller. — Upon  receipt  of  resolutions 
from  the  shareholders  evidencing  compliance  with  the  legal  re- 


499 

quirements,  etc.,  the  Comptroller  will  issue  his  certificate  approv- 
ing the  consolidation,  and  upon  request  will  telegraph  advice  of  his 
final  approval  upon  receipt  of  which  the  consolidation  can  be 
actually  completed. 

§  469.  Transfer  of  Bonds  and  Other  Assets. — A  National  bank 
consolidating  under  this  act  is  not  required  to  deposit  lawful 
money  for  its  outstanding  circulation,  but  its  assets  and  liabili- 
ties shall  be  reported  by  the  continuing  bank.  All  the  rights, 
franchises  and  interests  of  a  National  bank  so  consolidated  in  and 
to  every  species  of  property,  personal  and  mixed,  and  choses  in 
action  are  transferred  to  and  vested  in  the  National  bank  into 
which  it  is  consolidated  without  any  deed  or  other  transfer.  The 
continuing  bank  holds  and  enjoys  all  these  rights  of  property 
franchises  and  interests  in  the  same  manner  and  to  the  same 
extent  as  they  were  held  and  enjoyed  by  the  National  bank  con- 
solidated with  it. 

Bonds  held  by  either  bank  contemplating  consolidation  under 
this  act  in  excess  of  the  amount  of  capital  of  the  consolidated  bank 
must  be  withdrawn  prior  to  the  date  on  which  the  consolidation 
is  approved  by  the  Comptroller's  Office.  These  bonds  will  be  re- 
leased upon  the  deposit  of  lawful  money  to  retire  outstanding 
circulation,  provided  the  resolution  of  the  directors  authorizing 
the  withdrawal  and  the  Treasurer's  duplicate  receipts  for  the  bonds 
have  been  furnished. 

If  bonds  are  to  be  transferred  to  the  consolidated  association,  it 
will  be  necessary  to  furnish  the  Treasurer's  receipts  therefor,  and 
the  bonds  will  be  transferred  to  the  Treasurer  of  the  United  States 
in  trust  as  security  for  circulation  of  the  consolidated  bank  with- 
out other  authority  than  that  contained  in  the  agreement  and  reso- 
lution for  consolidation. 
• 

§  470.  Dissenting  Shareholders — Rights  of. — When  the  con- 
solidation has  been  completed  and  approved  by  the  Comptroller, 
any  shareholder  of  either  of  the  associations  so  consolidated  who 
has  not  voted  for  such  consolidation  may  give  notice  to  the  di- 
rectors of  the  association  in  which  he  is  interested  within  twenty 


500 

days  from  the  date  of  the  certificate  of  approval  of  the  Comp- 
troller that  he  dissents  from  the  plan  of  consolidation  as  adopted 
and  approved.  He  shall  be  entitled  then  to  receive  the  value  of 
the  shares  held  by  him,  to  be  ascertained  by  an  appraisal  made 
by  a  committee  of  three  persons,  one  to  be  selected  by  the  share- 
holder, one  by  the  directors,  and  the  third  by  the  two  so  chosen. 
In  case  the  value  so  fixed  shall  not  be  satisfactory  to  the  share- 
holder, he  may  within  five  days  after  being  notified  of  the  ap- 
praisal appeal  to  the  Comptroller  of  the  Currency,  who  shall  cause 
a  reappraisal  to  be  made,  which  shall  be  final  and  binding.  If 
reappraisal  exceeds  the  value  fixed  by  the  committee,  the  bank 
must  pay  the  expenses  of  the  reappraisal;  otherwise  the  appellant 
must  pay  the  expenses.  The  value  so  ascertained  and  determined 
is  a  debt  due  and  must  be  paid  to  said  shareholder  from  the  bank. 
The  share  so  paid  must  be  surrendered  and  after  due  notice  sold 
at  public  auction  within  thirty  days  after  the  final  appraisement. 

§  471.  Services  of  an  Attorney. — The  publishers  have  handled 
many  consolidations  under  this  act  and  will  be  pleased  to  give  every 
help  and  assistance  possible. 

§  472.  Liquidation  for  Consolidation — Methods  of  Consolida- 
tion.— Consolidation  other  than  under  the  Act  of  Nov.  7,  1918, 
can  be  accomplished  only  by  pursuing  one  of  the  following  methods : 

First.  Without  an  increase  of  capital  the  directors  of  the  absorb- 
ing bank  may  enter  into  a  contract  with  the  directors  or  agents 
of  the  liquidating  association  to  purchase  its  assets,  assume  liabili- 
ties to  depositors  and  other  creditors,  and  to  pay  the  value  of 
assets  purchased  in  excess  of  liabilities  to  depositors  and  other 
creditors,  less  any  expenses  incident  to  liquidation. 

Second.  By  increasing  the  capital  stock  of  the  absorbing  bank 
to  an  amount  equal  to  that  of  the  liquidated  bank,  the  additional 
shares  may  be  sold  to  stockholders  of  the  latter,  consent  thereto 
having  been  previously  obtained  from  shareholders  of  the  absorb- 
ing association. 

The  National  Bank  Act  makes  no  provision  for  the  allotment 
of  new  stock  when  a  bank  increases  its  capital  but  under  the  com- 


501 

mon  law,  where  it  has  not  been  modified  by  statute,  when  a  cor- 
poration has  adopted  a  resolution  to  increase  its  capital,  the  share- 
holders of  the  corporation  have  the  right  to  participate  in  the 
increase  in  proportion  to  the  number  of  shares  held  by  each  and 
waiver  of  that  right  should  be  obtained  before  allotting  any  of  the 
shares  to  others. 

Provision  having  thus  been  made  for  shareholders  of  the  closed 
bank,  the  directors  of  the  continuing  bank  are  at  liberty  to  contract 
for  the  purchase  of  assets  and  the  assumption  of  liabilities  to  de- 
positors and  other  creditors  of  the  liquidated  bank. 

Ag  the  law  is  construed  as  requiring  the  payment  of  capital, 
original  or  on  account  of  increase,  in  money,  and  not  in  "notes 
or  like  evidences  of  debt,"  the  right  to  accept  stock  or  assets  repre- 
senting stock  of  the  closed  bank  and  to  issue  therefor  certificates 
in  the  continuing  bank  is  not  recognized.  In  every  such  case 
shareholders  of  the  closed  association  are  paid  the  value  of  their 
stock  either  in  cash  or  cashier's  checks,  the  proceeds  being  avail- 
able in  payment  of  shares  to  which  they  may  be  entitled  in  the 
absorbing  corporation. 

Third.  The  remaining  method  is  to  place  the  interested  banks 
in  voluntary  liquidation,  under  section  5220  of  the  United  States 
Revised  Statutes,  organize  anew  under  a  different  corporate  title, 
and  acquire,  in  the  manner  hereinbefore  outlined,  the  business 
of  the  liquidating  associations.  This  method  enables  the  incor- 
porators to  place  the  stock  as  they  may  determine. 

In  any  event  there  should  be  a  contract  covering  the  transfer  of 
assets  and  assumption  of  liabilities,  and  an  examination  of  the 
assets  to  be  taken  over  will  be  made  by  a  National  bank  examiner 
at  the  expense  of  the  bank  acquiring  the  assets. 

§  473.  Same — Form  of  Eesolutions. — Forms  of  resolutions  re- 
lating to  assumption  of  liabilities  of  a  liquidated  association,  and 
transfer  of  bonds  on  deposit  to  secure  circulation,  to  be  executed 
and  filed  with  the  Comptroller  of  the  Currency,  arc  as  follows: 


502 

RESOLUTION     ASSUMING    THE    LIABILITIES     OF    AN     ASSOCIATION     PLACED     Iff 
LIQUIDATION    FOR    FUKPOSE    OF    CONSOLIDATION. 

I,  ,  cashier  of  the  National  Bank  of  ,  hereby 

certify  that  at  a  meeting  of  the  board  of  directors  of  said  association, 

held  on  the day  of -,  a  resolution  was  adopted  relative  to 

the  consolidation  of  the  — National  Bank  of with  the  asso- 
ciation first  mentioned,  under  section  5223  of  the  Revised  Statutes  of 
the  United  States,  which  resolution  is  in  the  words  following: 

"Resolved,  That  this  association  as  a  part  of  the  consideration  for 

the  purchase  of  all  the  assets  of  the  ■ —  National  Bank  of  — , 

does  hereby  assume  all  the  liabilities  of  said National  Bank  of 

1 — ,  including  the  redemption  of  its  circulating  notes." 

And,  in  pursuance  of  said  resolution,  the  National  Bank  of 

,  has  acquired  all  the  assets  of  the  said National  Bank  of 

,   and  assumed  all   its  liabilities,   including   the   redemption   of 


its  circulating  notes,  the  association  last  mentioned  having  been  placed 
in  voluntary  liquidation  in  conformity  with  the  provisions  of,  sections 
5220  and  5221  of  the  United  States  Revised  Statutes  for  the  purpose 

of  consolidation.  , 

[seal.]  Cashier  and  Secretary  of  the  Board  of  Directors. 


RESOLUTION    AUTHORIZING   WITHDRAWAL   AND    ASSIGNMENT   OF   BONDS    AS    A 
RESULT   OF    CONSOLIDATION. 

At  a  meeting  of  the  board  of  directors  of ,  held  at  its  banking 

house  on  — ,  the  following  resoution  was  adopted: 

Resolved,  That  the  Comptroller  of  the  Currency  be,  and  he  is  here- 
by authorized  to  withdraw  $ ,  U.  S.  bonds,  deposited  with  the 

Treasurer  of  the  United  States  by  this  bank  to  secure  circulation,  and 
described  as  follows: 

$ — < per  cent,  of  the  loan  of ,  and  that  the  Treasurer 

U.  S.  be,  and  is  hereby  authorized  to  assign  and  transfer  the  same 

to  said  Treasurer  in  trust  for  ,  which  association  assumes  the 

liabilities  of  the  said  ,  including  the  redemption  of  its  circulat- 
ing notes. 

I  certify  that  the  above  is  a  true  extract  from  the  minutes  of  said 
meeting  , 

[seal  of  bank.]  Cashier  and  Secretary  of  Board  of  Directors. 

Note. — The  Treasurer's  receipts  for  the  bonds  proposed  to  be  with- 
drawn must  be  forwarded,  with  this  form  properly  filled,  to  the  Comp- 
troller of  the  Currency. 

§  474.  Same — Procedure. —  No  rights  exist,  or  are  conferred  by 


503 

law,  upon  the  shareholders  of  a  liquidating  association  as  share- 
holders of  the  bank  with  which  its  business  is  being  consolidated, 
nor  can  such  shareholders  become  shareholders  of  the  absorbing 
bank,  except  through  the  voluntary  action  of  shareholders  of  the 
latter.  Assuming  that  shareholders  of  the  liquidated  bank  are  to 
become  shareholders  of  the  continuing  association,  it  becomes  neces- 
sary for  the  shareholders  of  the  latter  association  to  increase  the 
capital  stock  to  the  requisite  amount  in  conformity  with  the  pro- 
visions of  the  Act  of  May  1,  1886,  and  to  waive  their  right  to 
participate  in  the  increase  in  order  that  the  stock  can  be  sold  to 
shareholders  of  the  closed  association.  The  right  to  participate  in 
an  increase  in  the  capital  stock  of  a  bank  exists  at  common  law  and 
is  generally  written  into  the  articles  of  National  banking  associa- 
tions. Waiver  of  that  right  is  essential  to  enable  the  stock  to  be 
sold  to  others. 

When  shareholders  of  the  continuing  bank  have  effected  an 
increase  in  capital,  and  authorized  the  sale  of  the  stock  to  share- 
holders of  the  liquidated  bank,  the  directors  of  the  former  may 
contract  with  the  directors  or  liquidating  agent  of  the  closed  asso- 
ciation for  the  assumption  of  liabilities  to  depositors  and  other 
creditors,  on  transfer  of  an  equivalent  amount  of  assets,  and  for 
the  purchase  of  assets  representing  shareholders'  interests,  to  enable 
shareholders,  with  the  proceeds,  to  pay  for  stock  to  be  issued  to 
them. 

It  is  not  regarded  as  essential  that  the  payment  for  such  assets 
should  be  made  in  actual  money,  as  a  check  (cashier's)  or  draft 
will  answer  the  purpose  as  constituting  a  demand  obligation,  to  be 
satisfied  either  in  cash  or  in  stock  to  be  issued  to  the  shareholders 
as  a  result  of  the  contemplated  consolidation. 

Where  consolidation  is  effected  without  making  provision  for 
shareholders  of  the  liquidated  bank  by  increasing  the  capital  of  the 
continuing  association,  the  consolidation  resolves  itself  into  a  mere 
purchase  of  the  business  of  the  closed  bank  which  may  carry  with 
it  an  assumption  of  liabilities  to  depositors  and  other  creditors, 
offsetting  an  equivalent  amount  of  assets  transferred,  and  the  pay- 
ment in  cash  of  the  liquidating  value  of  assets  representing  share- 
holders' interests.     A  contract  of  that  character  may  be  entered 


504 

into  between  the  absorbing  bank  and  the  directors  or  liquidating 
agent  of  the  closed  association. 

In  some  instances  where  consolidation  of  business  only  is  deemed 
advisable,  it  has  been  found  preferable  to  place  the  associations 
interested  in  voluntary  liquidation  in  conformity  with  Section 
5220  of  the  Revised  Statutes,  and  organize  a  new  bank.  When  the 
capital  stock  has  been  paid  in,  as  required  by  law,  and  charter 
issued,  the  association  may  acquire  the  business  of  the  liquidated 
banks  in  the  manner  hereinbefore  outlined.  This  course  is  fre- 
quently found  advisable  where  it  is  desired  to  effect  a  change  in 
the  personnel  of  the  shareholders  and  to  start  business  with  a 
"clean  sheet/'  Assets  of  the  closed  banks,  not  purchased  by  the 
new  association,  are  ordinarily  placed  in  charge  of  liquidating 
agents  for  collection  and  pro  rata  distribution  to  shareholders  of 
record  at  date  of  liquidation. 


CHAPTER  VII. 

Increase  and  Reduction  of  Capital  Stock,  Restoration  of 
Impaired  Capital,  Change  of  Name  or  Location. 

Section  475.  Increase  of  Capital  Stock — Application  to  Increase. 

476.  Same — Meeting  of  Shareholders. 

477.  Same — Increase  from  Surplus. 

478.  Same — Right  of  Shareholders  to  New  Stock. 

479.  Same — Price  of  New  Stock. 

480.  Reduction  of  Capital  Stock — Application  to  Reduce. 

481.  Same — Meeting  of  Shareholders. 

482.  Same — Rights  of  Shareholders. 

483.  Restoration  of  Impaired  Capital. 

484.  Same — Notice  from  Comptroller. 

485.  Same — Notice  to  Shareholders. 

486.  Same — Resolution  of  Shareholders. 

487.  Same — Certificate  of  Payment  of  Assessment. 

488.  Same — Sale  of  Stock  of  Delinquent  Shareholders. 

489.  Same — Appointment  of  Receiver. 

490.  Change  of  Name  and  Location. 

§  475.  Increase  of  Capital  Stock — Application  to  Increase. — 

A  National  bank  may  with  the  consent  of  the  Comptroller  and 
by  a  vote  of  shareholders  owning  two-thirds  of  the  shares  increase 
its  capital  stock  to  any  sum  approved  by  the  Comptroller  (Act  May 
1,  1886,  See  §  27.) 

A  bank  that  contemplates  increasing  its  capital  stock  should 
write  the  Comptroller,  as  his  approval  is  necessary,  and  state  the 
amount  of  the  proposed  increase.  This  should  be  done  before 
formally  submitting  the  question  to  the  shareholders.  If  the  con- 
dition of  the  bank  warrants  the  increase  the  Comptroller  will  advise 
the  bank  of  his  approval  and  send  instructions  and  blank  forms. 

505 


"  ,  506 

FORM    OF   APPLICATION    TO    INCREASE    CAPITAL. 

•   19—. 

To  the  Comptroller  of  the  Currency, 

Washington,  D.  C. 
Sir: 

Acting  under  the  authority  of  a  resolution  of  the  board  of  directors, 
I  request  approval  of  this  application  to  increase  the  capital  stock  of 

The National  Bank  of from  $ to  $ ,  and  that 

the  proper  blanks  and  instructions  be  furnished. 

The  stock  is  to  be  sold  at  % — per  share,  and  the  present  share- 
holders will  be  permitted  to  subscribe  for  new  stock  in  proportion  to 
the  amount  of  stock  now  held  by  them. 

It  is proposed  to  declare  a  dividend  of  per  cent  to 

enable  shareholders  to  make  payment  on  the  new  stock. 

The  purchase  of  the  business  of  the  Bank  is  >. — •  con- 
templated  in  connection  with  this  increase. 
On  this  date  the  books  of  this  bank  show  the  following: 

Capital $ 

Surplus $ 

Undivided  profits $ 

Total    deposits    $ 

Total  resources i. . .  $ 


President  or  Cashier. 

§  476.  Same — Meeting  of  Shareholders  — The  next  step  is  to 
call  a  special  meeting  of  shareholders  on  30  days'  notice  and  secure 
the  adoption  of  a  suitable  resolution  authorizing  the  increase. 
This  meeting  must  be  duly  called,  and  the  resolution  must  receive 
the  votes  of  shareholders  representing  at  least  two-thirds  of  the 
existing  stock.  Shareholders  who  cannot  be  present  may  be  repre- 
sented by  proxy,  but  no  officer,  director  or  employee  of  the  bank 
can  act  as  proxy.  Then  subscriptions  for  the  new  stock  may  be 
taken.  When  all  the  new  stock  shall  have  been  subscribed  and 
paid  for  in  cash,  the  payment  should  be  certified  to  the  Comptroller 
of  the  Currency  by  the  President  or  cashier. 

A  portion  of  a  proposed  increase  will  not  be  approved  by  the 
Comptroller.  The  whole  amount  as  stated  in  the  shareholders  reso- 
lution must  be  paid  in  and  certified. 

The  increase  becomes  effective  on  the  date  of  the  issue  of  the 


507 

Comptroller's  certificate,  and  the  books  of  the  bank  should  not  be 
changed  nor  the  certificates  of  stock  issued  prior  thereto. 

After  the  adoption  of  the  resolution  it  is  suggested  that  the 
meeting  be  adjourned  to  meet  on  call  of  the  banks'  officers  so  that 
if  there  are  any  defects  in  the  resolution  they  may  be  corrected 
without  an  additional  30  day  notice  and  delay. 

FORM    OF    BESOLUTION    TO    INCREASE    CAPITAL    STOCK. 


No. 


National 


At  a  meeting  of  the  shareholders  of  The  — 

Bank  of  ,  held  on  ,  thirty  days'  notice  of  the  proposed 

business  having  been  given,  it  was 

Resolved,  That,  under  the  provisions  of  the  act  of  May  1,  1886,  the 

capital  stock  of  this  association  be  increased  in  the  sum  of  $ , 

making  the  total  capital  $ 1 — . 

The  foregoing  resolution  was  adopted  by  the  following  vote,  repre- 
senting not  less  than  two-thirds  of  the  capital  stock  of  the  associa- 
tion, no  director,  other  officer,  or  employe  having  acted  as  proxy. 


Name  of  shareholder. 


Residence. 


Name  of  Proxy.    No.  of  shares 


Total  number  of  shares  voted  in  favor  of  the  resolution 
Total  number  of  shares  voted  against  the  resolution.. 
Total  number  of  shares  represented  at  the  meeting. . . . 
Total  number  of  shares  of  capital  stock 


I  hereby  certify  that  this  is  a  true  and  correct  report  of  the  vote 
and  of  the  resolution  adopted  at  a  meeting  of  the  shareholders  of 
this  bank  held  on  the  day  mentioned. 

[SEAL  OF   BANK.]  — 


President  or  Cashier. 


Subscribed   and   sworn   to   before    me,   this 
A.  D.  19—. 

[SEAL   OF    NOTARY.] 


day  of 


Notary  Public. 


FORM  OF  NOTICE  OF  SPECIAL  SHAREHOLDERS'   MEETING. 

You  are  hereby  notified  that  a  special  meeting  of  the  stockholders 
of  the  Bank  will  be  held  at  its  banking  rooms  in  ,  on 


508 

,  at  o'clock  ■,  to  consider  and  vote  upon  the  ques- 
tion of   increasing  the   capital   stock  of   the   bank  from    $ ■ —   to 

$ ,    and    for    the   transaction    of    such    other    business    as    may 

properly  come   before   the  meeting. 

■ ,   Cashier. 


PROXY    FOR   SPECIAL    MEETING    OF    STOCKHOLDERS. 

Know  all  men  by  these  presents,  that  I,  the  undersigned  stockholder 

in  the ,  do  hereby  constitute  and  appoint  —  my  true  and 

lawful  attorney  with  power  of  substitution  for  and   in  my  name  to 

vote  upon  all  the  stock  of  said  ,  standing  in  my  name,  at  the 

special  meeting  of  the  stockholders  of  said  bank,  to  be  held   at  its 

banking  rooms  in  ,  on  ,  at  o'clock  ,  or  at 

any  adjournment  thereof,  on  the  question  of  the  proposed  increase 
in  capital  stock  of  said  national  bank,  with  all  the  powers  the  under- 
signed should  possess  if  present  personally  at  said  meeting,  or  any 
adjournment  thereof,  hereby  revoking  all  previous  proxies. 

In  witness   whereof,    I   hereunto  set  my  hand   this  day  of 

,  19 . 

Witness  to  signature: 


Number  of  shares 


CERTIFICATE    OF   INCREASE   OF    CAPITAL    STOCK. 

No.  ■ . 

National  Bank  of 


19—. 


To  the  Comptroller  of  the  Currency, 

Washington,  D.  C. 

It  is  hereby  certified  that  the  capital  stock  of National  • 

Bank  of  has  been  increased  pursuant  to  the  provisions  of  the 

act  of  Congress  approved  May  1,  1886,  in  the  sum  of —  dollars, 

all  of  which  has  been  paid  in  cash,  not  in  promissory  notes  or  other 
like  evidences  of  debt,  and  that  the  paid-up  capital  stock  of  the  bank 
now  amounts  to  dollars. 

[seal  of  bank.]  , 

President  or   Cashier. 

State  of , 

County  of  ,  ss: 

Subscribed   and   sworn   to  before   me,  this  day   of  , 

A.  D.   19—. 

[SEAL  of  notary.]  , 


Notary  Public. 


509 

§  477.  Same — Increase  From  Surplus. — There  is  no  authority 
in  law  for  the  declaration  of  a  stock  dividend  by  a  National  bank. 
Neither  the  surplus  fund  nor  the  undivided  profits  can  be  used, 
except  by  the  declaration  of  a  dividend  by  the  board  of  directors 
in  the  Tegular  course,  in  which  event  the  shareholders,  if  they  so 
desire,  may  use  the  dividend  checks  in  payment  to  the  extent  of 
their  subscriptions  to  the  additional  capital.  Such  portion  only 
of  the  surplus  fund  as  exceeds  the  amount  required  by  law  to  be 
accumulated,  20  per  cent,  of  the  capital,  can  be  capitalized  in  the 
manner  indicated.  If  the  dividend  checks  are  accepted  in  pay- 
ment of  subscriptions  to  the  stock,  the  certificate  covering  pay- 
ment of  the  money  should  be  accompanied  by  a  complete  report 
of  the  dividend,  and  advice  that  all  dividend  checks  have  been  in- 
dorsed b}r  the  shareholders  and  returned  to  the  bank.  In  order  to 
facilitate  matters,  if  desired,  authority  may  be  obtained  from  the 
shareholders  in  advance  of  the  issuance  of  the  dividend  checks  to 
credit  the  dividend  upon  subscriptions  to  the  new  capital  stock. 
If  it  is  desired  to  do  this  a  form  similar  to  the  following  should  be 
used : 

FORM   OF   AUTHORITY   TO    CREDIT   DIVIDEND   UPON    STJSCRIPTTON    FOR    NEW 
CAPITAL    STOCK. 

Know  all  men  by  these  presents,  that  ,  cashier  of  ,  is 

hereby  authorized  and  instructed  to  credit  upon  the  subscription  of 

the  undersigned  to  the  increased  capital  stock  of  the  to  be 

authorized  at  the  stockholders'  meeting  on  the  sum  of  

dollars    ($ — ■ ),   which   the   undersigned   is   entitled   to   receive   in 

accordance  with  vote  of  board  of  directors  of  said  bank  passed  , 

declaring  a  dividend  of  ($ ■ — )  per  share  upon  the  out- 
standing capital  stock  of  said  bank. 

And  said  is  hereby   further   authorized   to   indorse  for  me 

the  check  in  payment  of  said  dividend  to  be  issued  in  my  name  by 
said  (  and  to  apply  the  proceeds  in  payment  of  said  subscrip- 
tion to  capital  stock. 

■ ■ — .     [seal.] 

Date  ■ . 

Witness: 


§  478.  Same— Right   of   Shareholders   to   New   Stock.—  While 
there  is  no  provision  in  the  National  bank  act  covering  this  ques- 


510 

tion,  under  the  common  law  when  the  capital  stock  of  a  corpora- 
tion is  increased  by  the  issuance  of  new  stock  each  holder  of  the 
original  stock  has  the  right  to  offer  to  subscribe  for  and  to  demand 
from  the  corporation  such  a  proportion  of  the  new  stock  as  the 
number  of  shares  already  owned  by  him  bears  to  the  whole  num- 
ber of  shares  before  the  increase.  This  right  must  be  exercised 
within  a  fixed  or  reasonable  time,  and  if  a  shareholder  fails  to  avail 
himself  of  it  he  is  barred  by  laches  or  acquiescence  of  his  right  to 
contest  the  disposition  of  the  stock  to  some  one  else.  But  the 
safer  course  and  the  one  which  the  directors  and  officers  should 
follow  generally  is  to  have  the  waiver  given  in  writing.  In  this 
matter  each  shareholder  is  bound  only  by  his  own  action  and  not 
by  any  vote  of  the  other  shareholders  even  if  they  own  two-thirds 
of  the  stock. 

In  the  event  that  the  shareholder  desires  to  subscribe  to  the 
stock  his  subscription  can  be  made  on  a  form  similar  to  the 
following : 

SUBSCRIPTION    TO    NEW    CAPITAL   STOCK. 


Date 
Cashier  , 


The  underigned  hereby  subscribes  for ( )  shares  of  the 

capital  stock  of  the of  the  issue  of  capital  stock  authorized  by 

the   stockholders   of   the   said    bank   at  a   special   meeting   held    on 

;  and  the  undersigned  hereby  agrees  to  cause  payment  for  such 

shares  of  stock  to  be  made  to  said  bank  at at  the  rate  of 


per  share  on  or  before  .    In  the  event  of  failure  to  make  said 

payment  in  the  said  time  as  herein  specified,  then  this  subscription 
and  any  rights  I  may  have  to  subscribe  for  the  said  new  stock  shall 
be  canceled  and  void. 

(Signed) , 


Street 


City  .     State 


§  479.  Same — Price  of  New  Stock. — It  is  customary  to  incor- 
porate in  the  resolution  for  the  increase  of  capital  a  provision  fixing 
the  price  of  the  new  stock  or  conferring  upon  the  directors  author- 
ity to  do  so.  This  price  may  be  fixed  at  either  the  par  value,  book 
value  or  market  value  of  the  stock. 


511 

If  the  stock  of  a  National  bank  is  worth  more  than  par,  and  the 
new  issue  is  being  sold  at  par,  the  issuance  of  new  stock  naturally 
will  depreciate  the  book  value  of  all  the  stock  of  the  bank.  The 
shareholder  who  does  not  desire  to  subscribe  to  the  new  stock,  but 
wishes  to  protect  his  equity  in  the  assets  of  the  bank,  should  be 
given  the  right  to  subscribe  and  be  permitted  to  assign  this  right 
to  other  parties  for  such  consideration  as  he  may  be  able  to  obtain 
therefor.  This  is  the  course  followed  in  other  corporations.  The 
following  is  a  form  for  such  assignment: 

FOBM    OF    ASSIGNMENT    OF    BIGHT    TO    SUBSCRIBE    TO     NEW    CAPITAL    STOCK. 

The  National  Bank  of  . 

Subscription  icarrant. 

This  is  to  certify  that ,  a  stockholder  of  record  of  the 

National  Bank  of  on  this  date,  holding  shares 


of  the  ■ —  National  Bank  of  ,  is   entitled  to  subscribe  for 

shares  of  the  increased  capital  stock  of  said  bank  at  $ —  per 

share  on  ,  and  up  to  and  including  .    Not  valid  after 


This   right  may  be  assigned   by   properly  witnessed   signature   on 
the   form   printed  below. 

The   National   Bank   of  , 

By  ,    Cashier. 

For  value  received,  hereby  sell,  assign,  and  transfer  unto 

all   my   rights   to   subscribe   for   the   within  shares  of 


the  increased   capital  stock  of  the  National  Bank  of 

subject  to  the  conditions  attached  by  said  bank  to  said  rights. 
Witness: 


§  480.  Reduction  of  Capital  Stock — Application  to  Reduce. — 

A  national  banking  association  may,  with  the  consent  of  the  Comp- 
troller of  the  Currency  and  of  the  Federal  Reserve  Board,  and  by 
a  vote  of  shareholders  owning  not  less  than  two-thirds  of  the  shares, 
reduce  its  capital  stock  to  any  sum  not  below  the  minimum  amount 
required  by  Sec.  5138  U.  S.  R.  S.  (Sec.  5143  U.  S.  R.  S.  as 
amended  by  Sec.  28  of  the  Federal  Reserve  Act.) 

An  association  that  contemplates  reducing  its  capital  stock  should 


512 

-advise  the  Federal  reserve  bank  and  the  Comptroller  of  the  pro- 
posed action  before  formally  submitting  the  question  to  the  share- 
holders, and  the  application  for  authority  to  reduce  the  capital 
should  be  accompanied  by  a  letter  from  the  Federal  reserve  bank 
of  the  district  giving  its  views  with  reference  to  the  proposed 
reduction.     No  special  form  of  application  is  required. 

On  receipt  of  the  application  the  Comptroller  will  advise  the 
bank  wlrnt  conditions,  if  any,  it  will  be  necessary  to  comply  with 
before  the  reduction  can  be  approved.  If  the  bank  has  not  been 
examined  within  a  brief  period  before  the  time  the  application  is 
made,  or  if  the  last  examination  did  not  show  it  to  be  in  a  satis- 
factory condition,  the  Comptroller  may  order  a  special  examina- 
tion before  passing  upon  the  application  to  reduce  the  capital 
stock. 

Any  losses  which  may  have  been  sustained  must  be  charged  off, 
and  if  the  bank  has  any  loans  which  are  excessive  or  will  become 
excessive  by  reason  of  the  reduction,  they  must  be  reduced  to  the 
limit  prior  thereto.  The  Comptroller  requires  the  correction  of 
any  other  conditions  that  are  shown  to  be  unsatisfactory  by  the  ex- 
aminer's report.  If  the  proposition  is  approved  the  Comptroller 
will  send  instructions  and  blank  forms. 

§  481.  Same — Meeting  of  Shareholders. —  The  next  step  is  to 
call  a  special  meeting  of  the  shareholders,  giving  them  notice  of  the 
date  and  object  of  such  meeting,  in  conformity  with  the  articles  of 
association  of  the  bank,  unless  said  notice  is  unanimously  waived. 
At  this  meeting  shareholders  may  be  represented  by  proxy,  but 
no  director,  other  officer,  or  employee  can  legally  act  as  proxy  and 
vote  the  stock  of  another  shareholder. 

The  shareholders  should  then  adopt  a  resolution  authorizing  a 
reduction  of  the  stock.  The  votes  in  favor  must  represent  at  least 
two-thirds  of  the  entire  stock  (two-thirds  of  a  quorum  is  not 
sufficient.) 

After  the  resolution  has  been  adopted  by  the  shareholders,  it  is 
suggested  that  it  would  be  advisable  to  adjourn  the  meeting  to  a 
fixed  date,  or  to  meet  at  call  of  the  officers  of  the  bank,  so  that,  if 
upon  examination  of  the  resolution  it  is  found  to  be  in  any  way  in- 


513 

formal,  a  new  resolution  can  be  adopted  without  the  necessity  of 
again  giving  the  30  days'  notice. 

The  reduction  becomes  operative  upon  the  issuance  of  the  Comp- 
troller's certificate  of  approval,  prior  to  which  the  circulation  of  the 
bank  must  be  reduced  (if  excessive)  to  not  more  than  the  amount 
of  the  capital  after  reduction,  by  a  deposit  of  lawful  money  with 
the  Treasurer  of  the  United  States  and  the  withdrawal  of  a  like 
amount  of  bonds. 

Upon  transmitting  a  copy  of  the  resolution  adopted  by  the  direc- 
tors authorizing  the  withdrawal  of  bonds  it  should  be  accompanied 
by  the  Treasurer's  duplicate  receipts  for  the  securities.  If  the  re- 
ceipts have  been  lost  or  destroyed  an  affidavit  to  that  effect  must  be 
sent  with  the  resolution. 

FORM    of    notice    of    special    meeting   of    shaeeholdebs. 
You  are  hereby  notified  that  a  special  meeting  of  the  stockholders 

of  the  — Bank,   will   be  held   at  its   banking  rooms   in   

on ,  at o'clock to  consider  and  vote  upon  the  ques- 
tion  of   reducing   the    capital    stock   of   the   bank   from    $ ,    to 

$ — ,    and    for    the    transaction    of    such    other   business    as    may 

properly    come    before    the    meeting. 


Cashier. 


FORM  OF  PROXY  FOR  SPECIAL  MEETING  OF  STOCKHOLDERS. 

Know  all  men  by  these  presents,  that  I,  the  undersigned  stock- 
holder in  the  — ,  do   hereby  constitute  and  appoint  ,   my 

true   and    lawful    attorney    with    power   of   substitution    for,    and   in 

my   name   to   vote  upon   all   the   stock   of   said,   ,   standing   in 

my  name  at  the  special   meeting  of  the  stockholders  of  said  bank, 

to   be  held   at   its   banking   rooms   in  — — < — ,   on   — ■,    at   

o'clock  ,   or  at   any  adjournment  thereof,   on   the   question   of 

the  proposed  reduction  in  capital  stock  of  said  national  bank,  with 
all  the  powers  the  undersigned  should  possess  if  present  personally 
at  said  meeting,  or  any  adjournment  thereof,  hereby  revoking  all 
provious    proxies. 

In  witness  whereof,  I  hereunto  set  my  hand  this  — ■ — ' —  day  of 
,   19 . 


Witness   to   signature: 


Number  of  shares 
33 


514 


FORM    OF   RESOLUTION    TO    BEDUCE   CAPITAL    STOCK. 
NO.    — . 

The  National  ■ —  Bank  of 


(Date.)    . 

At  a  meeting  of  the  shareholders  of  The  National  

Bank  of  — >. ,  held  on  — ■ ,  thirty  days'  notice  of  the  proposed 

business  having  been  given,  at  which  shareholders  were  present, 
representing  ' —  shares  of  stock  of  this   association,   it  was 

Resolved,  That,  under  the  provisions  of  Section  5143,  U.  S.  Re- 
vised Statutes,  and  of  the  acts  amendatory  thereof,  the  capital  stock 

of  this  association  be  reduced  in  the  sum  of  ? ,  leaving  the  total 

capital  after  said  reduction  $ — ■ . 

The  foregoing  resolution  was  adopted  by  the  following  vote,  repre- 
senting not  less  than  two-thirds  of  the  capital  stock  of  the  associa- 
tion, no  director,  other  officer,  or  employe  having  acted  as  proxy: 


Name  of  shareholder. 


Residence. 


Name  of  Proxy.    No.  of  shares. 


Total  number  of  shares  voted  in  favor  of  the  resolution. 
Total   number  of  shares  voted  against  the  resolution... 

Total  number  of  shares  represented  at  the  meeting 

Total  number  of  shares  of  capital  stock 


I  hereby  certify  that  the  foregoing  is  a  true  and  correct  report  of 
the  vote  and  of  the  resolution  adopted  at  a  meeting  of  the  share- 
holders of  this  bank,  held  on . 

[SEAL  OF   BANK.]  , 

President  or  Cashier. 

Subscribed   and    sworn   to   before  me,    this  day   of   > — , 

A.   D.   19—. 

[official   seal   of   officeb.]  , 

Notary   Public. 


§  482.  Same — Rights  of  Shareholders.— Each  shareholder  has 
the  right  to  participate  in  the  reduction  in  proportion  to  the  num- 
ber of  shares  then  held,  and  receive  cash  for  the  stock  surrendered, 
unless,  as  a  condition  precedent  thereto,  the  whole  or  a  portion  of 
the  amount  is  to  be  used  to  charge  off  losses.  In  this  event  the 
assets  so  charged  off  belong  to  the  shareholders  and  should  be 


515 

trusteed  and  the  proceeds  distributed  among  the  shareholders  of 
record  at  the  time  of  the  reduction.  With  the  consent  of  all  the 
shareholders,  the  assets  may  be  realized  upon  by  the  bank  and  the 
proceeds  carried  to  profit  account. 

If,  however,  some  of  the  shareholders  are  willing  to  surrender 
enough  of  their  stock  to  make  up  the  whole  amount  of  the  reduc- 
tion, there  is  no  necessity  of  disturbing  the  holdings  of  the  other 
stockholders. 

No  part  of  the  capital  set  free  by  reduction  can  be  carried  to  sur- 
plus or  to  undivided  profits  without  the  unanimous  consent  of  the 
shareholders.  When  the  reduction  is  made  the  shareholders  should 
return  their  old  stock  certificates.  New  certificates  for  the  capital 
as  reduced  should  then  be  issued.  The  issuance  of  fractional  shares 
is  not  unlawful,  but  is  a  matter  for  determination  by  the  board  of 
directors. 

§  483.  Restoration  of  Impaired  Capital. — The  Comptroller 
takes  the  initial  steps  to  restore  an  impairment  of  capital  stoclc. 
After  the  notice  of  impairment  is  received,  the  duty  of  submitting 
the  matter  to  the  shareholders  is  in  the  hands  of  the  directors  but 
they  cannot  lay  the  assessment  themselves.  For  this  purpose  it  is 
necessary  to  call  a  meeting  of  the  shareholders  who  must  levy  the 
assessment  upon  themselves.  The  assessment  is  enforceable  only 
against  the  stock  and  no  action  will  be  against  a  stockholder  per- 
sonally.    (Commercial  Bank  v.  Weinhard,  192  U.  S.,  243.) 

§  484.  Same — Notice  From  Comptroller. — If  the  Comptroller 
discovers  from  the  examination  of  a  National  bank  that  its  capital 
is  impaired  through  losses  exceeding  the  amount  of  its  surplus 
and  undivided  profits,  he  writes  and  advises  the  bank  that  the  losses 
should  be  charged  off  without  delay.  A  formal  notice  of  impair- 
ment of  capital  is  enclosed  with  instructions  to  make  the  deficiency 
good  by  assessment  of  the  stock  or  to  place  the  bank  in  voluntary 
liquidation  as  required  by  law. 

If  the  directors  or  shareholders  purchase  unconditionally  for  cash 
sufficient  of  the  worthless  assets  to  restore  the  capital  the  formal 
notice  of  impairment  will  be  withdrawn. 


516 

§  485.  Same— Notice  to  Shareholders.— Upon  receipt  of  notice 
of  impairment  from  the  Comptroller,  the  directors  should  give  each 
and  every  shareholder  immediate  notice  of  a  special  meeting  to  be 
held  in  thirty  days  to  vote  either  for  the  assessment  or  for  liquida- 
tion. Haste  is  necessary  in  order  that  the  directors  may  be  in  a 
position  at  the  end  of  three  months  to  advertise  (under  Sec.  4,  Act 
June  30,  1876)  the  sale  of  the  stock  of  any  delinquent  shareholder 
in  order  to  make  good  his  proportion  of  the  assessment. 

The  following  is  the  form  of  notice  to  be  sent  to  shareholders : 


NOTICE  TO  SHAREHOLDERS  OF  IMPAIRMENT  OF  CAPITAL. 


-,  19- 


Sir:  You  are  hereby  notified  that  this  association  has  received 
notice  from  the  Comptroller  of  the  Currency  that  its  capital  stock  has 
become  impaired  and  that  under  the  provisions  of  Section  5205,  United 
States  Revised  Statutes,  this  deficiency  in  the  capital  stock  must  be 
made  good  by  assessment  upon  the  shareholders  pro  rata  to  the  amount 
of  capital  stock  held  by  each,  or  the  bank  placed  in  liquidation. 

You  are  hereby  notified  that  a  meeting  of  the  shareholders  of  this 
association  will  be  held  on  the day  of at for  the  pur- 
pose of  considering  and  voting  upon  the  question  of  paying  the  assess- 
ment or  placing  the  bank  in  liquidation.  If  an  assessment  is  determined 
upon,  it  must  be  paid  in  within  three  months  from  the  date  of  the 

Comptroller's  notice, ,  19 — . 

Section  5205,  United  States  Revised  Statutes,  provides  that — 

"Every  association  which  shall  have  failed  to  pay  up  its  capital  stock, 
as  required  by  law,  and  every  association  whose  capital  stock  shall  have 
become  impaired  by  losses  or  otherwise,  shall,  within  three  months 
after  receiving  notice  thereof  from  the  Comptroller  of  the  Currency, 
pay  the  deficiency  in  the  capital  stock,  by  assessment  upon  the  share- 
holders pro  rata  for  the  amount  of  capital  stock  held  by  each;  and  the 
Treasurer  of  the  United  States  shall  withhold  the  interest  upon  all 
bonds  held  by  him  in  trust  for  any  such  association,  upon  notification 
from  the  Comptroller  of  the  Currency,  until  otherwise  notified  by  him. 
If  any  such  association  shall  fail  to  pay  up  its  capital  stock,  and  shall 
refuse  to  go  into  liquidation,  as  provided  by  law,  for  three  months 
after  receiving  notice  from  the  Comptroller,  a  receiver  may  be  appointed 
to  close  up  the  business  of  the  association,  according  to  the  provisions 
of  section  fifty-two  hundred  and  thirty-four." 

This  section  was  amended  by  section  4,  act  of  June  30,  187C,  as 
follows: 

"That  the  last  clause  of  section  fifty-two  hundred  and  five  of  said 


517 

statutes    is  hereby  amended  by  adding  to  the  said  section  the  follow- 
ing proviso: 

"  'And  provided,  That  if  any  shareholder  or  shareholders  of  such 
bank  shall  neglect  or  refuse,  after  three  months'  notice,  to  pay  the 
assessment,  as  provided  in  this  section,  it  shall  be  the  duty  of  the  board 
of  directors  to  cause  a  sufficient  amount  of  the  capital  stock  of  such 
shareholder  or  shareholders  to  be  sold  at  public  auction  (after  thirty 
days'  notice  shall  be  given  by  posting  such  notice  of  sale  in  the  office 
of  the  bank,  and  by  publishing  such  notice  in  a  newspaper  of  the  city 
or  town  in  which  the  bank  is  located,  or  in  a  newspaper  published 
nearest  thereto)  to  make  good  the  deficiency,  and  the  balance,  if  any, 
shall  be  returned  to  such  delinquent  shareholder  or  shareholders.' " 


Directors  of 


§  486.  Same — Resolution  of  Shareholders. —  If  the  shareholders 
at  the  meeting  vote  an  assessment  on  the  stock  to  restore  the  im- 
pairment a  report  of  the  resolution  should  be  sent  to  the  Comp- 
troller on  the  following  form: 

RESOLUTION    TO    RESTORE    IMPAIRED    CAPITAL. 


No.    . 

At  a  Meeting  of  the  Shareholders  of  the National 

bank  of ,  held  on ,  19 

due  notice  of  the  proposed  business  having  been  given,  at  which  share- 
holders were  present  in  person  or  by  proxy,  representing shares 

of  the  stock  of  this  Association,  it  ivas — 

RESOLVED,  That,  under  the  provisions  of  Section  5205,  U.  S.  Re- 
vised Statutes,  the  deficiency  in  the  capital  stock  of  this  association 
amounting  to  $ sliall  be  made  good  by  assessment  upon  the  share- 
holders pro  rata  on  the  amount  of  capital  stock  held  by  each. 

The  resolution  was  adopted  by  the  folloicing  vote: 


Name  of  shareholder. 


Residence. 


Name   of  Proxy*      No.  of  shares 


Number  of  shares  voted  in  favor  of  the  resolution,  in  person 
Number  of  shares  voted  in  favor  of  the  resolution,  by  proxy 

Total — 


518 


Number  of  shares  voted  against  the  resolution,  in  person. 
Number  of  shares  voted  against  the  resolution,  by  proxy. 


Total 

Total  number  of  shares  represented  at  the  meeting. 


seal  I  hereby  certifiy  that  the  above  is  a  true  and  correct  report 

of  of  the  resolution  adopted  and  vote  at  a  meeting  of  the  share- 

bank  holders  of  this  Bank  held  on  ............... 

President  or  Cashier. 

Subscribed  and  sworn  to  before  me,  this  day  of A.  D.. . . 

Seal  of  Notary.  

Notary   Public. 
*  No  director,  other  officer,  or  employe  of  the  association  can  legally 
vote  the  stock  of  any  other  shareholder. 

§  487.  Same — Certificate  of  Payment  of  Assessment. —  When 
the  amount  of  the  assessment  has  been  entirely  paid  in  it  should 
be  certified  to  the  Comptroller  on  the  following  form : 

— r—. —  National Bank  of , 


— ,  ,  192--. 

TO  the  COMPTEOLLEB  OF  THE  CURRENCY, 

"Washington,  D.  C. 

It  is  hereby  certified  that  the  sum  of  dollars,  necessary  to 

make  good  an  impairment  of  the  capital  stock  of  The , 

notice  of  which,  dated  ,  192 — ,  was  given  by  the  Comptroller  of 

the  Currency  under  the  provisions  of  section  5205,  United  States  Re- 
vised Statutes,  has  been  fully  paid  in  cash,  and  that  the  paid-up 
capital  stock  of  said  bank  now  amounts  to dollars. 

[seal  of  bank.]  , 

Cashier. 

State  of  , 


County  of 


I, ,  cashier  of  "The  — National  Bank  of 

,"  in  the  State  of ,  do  solemnly  swear  that  the  fore- 


going certificate  by  me  subscribed  is  true. 

Subscribed  and  sworn  to  before  me  this day  of ,  192 — . 

[official  seal  of  officer.]  , 


519 

§  488.  Same — Sale    of    Stock    of   Delinquent   Shareholders. — 

Section  5205,  United  States  Eevised  Statutes,  provides  that  if 
any  shareholder  or  shareholders  of  such  bank  shall  neglect  or  re- 
fuse, after  three  months'  notice,  to  pay  the  assessment,  as  provided 
in  that  section,  it  shall  be  the  duty  of  the  board  of  directors  to 
cause  a  sufficient  amount  of  the  capital  stock  of  such  shareholder 
or  shareholders  to  be  sold  at  public  auction  (after  30  days'  notice 
shall  be  given  by  posting  such  notice  of  sale  in  the  office  of  the 
bank,  and  by  publishing  such  notice  in  a  newspaper  of  the  city  or 
town  in  which  the  bank  is  located,  or  in  a  newspaper  published 
nearest  thereto),  to  make  good  the  deficiency,  and  the  balance,  if 
any,  shall  be  returned  to  such  delinquent  shareholder  or  share- 
holders. 

§  489.  Same — Appointment  of  Receiver. — The  Comptroller, 
however,  in  his  discretion,  may  appoint  a  receiver  after  three 
months.  This,  it  would  seem,  makes  it  a  matter  of  judgment  for 
the  directors  or  others  most  interested  in  the  bank  to  make  good 
the  impaired  stock  of  the  delinquent  stockholders  and  trust  to  the 
sale  to  reimburse  themselves  or  to  let  the  bank  go  into  the  hands 
of  a  receiver  at  the  end  of  three  months,  if  the  Comptroller  should 
insist  on  the  appointment  of  a  receiver. 

§  490.  Change  of  Name  and  location. — A  national  banking 
association  may,  with  the  consent  of  the  Comptroller  of  the  Cur- 
rency and  by  the  vote  of  shareholders  owning  at  least  two-thirds 
of  the  entire  stock  of  the  association,  change  its  name  or  place 
where  its  operations  are  carried  on  to  any  other  locality  in  the 
same  State  not  more  than  30  miles  distant. 

When  an  association  desires  to  change  its  title  or  location,  the 
proposition  should  be  submitted  to  the  Comptroller  of  the  Cur- 
rency for  consideration;  and,  when  approved,  a  meeting  of  share- 
holders called  that  the  required  vote  may  be  obtained. 

Due  notice  of  the  meeting  must  be  given  and  a  certified  copy  of 
the  resolution,  under  seal  of  the  bank,  sent  to  the  Comptroller  of 
the  Currency,  accompained  by  a  copy  of  the  resolution  of  the  board 
of  directors  authorizing  the  Treasurer  of  the  United  States  to 


520 

assign  to  the  bank  under  its  new  title  any  bonds  held  by  him  as 
security  for  circulation,  together  with  the  Treasurer's  duplicate 
receipts  for  the  securities.  An  order  for  plate  or  plates  and  cir- 
culation to  conform  to  change  of  title,  etc.,  should  also  be  sub- 
mitted. 

No  change  of  name  or  location  is  valid  until  the  Comptroller's 
certificate  of  approval  is  issued.     (Act  May  1,  1886.) 

The  removal  of  a  bank  to  a  different  street  location  but  within 
the  limits  of  the  place  where  it  was  organized  does  not  require  any 
action  by  the  shareholders  or  the  approval  of  the  Comptroller.  It 
is  entirely  within  the  control  of  the  board  of  directors  unless  the 
specific  location  is  fixed  by  the  articles  of  association,  in  which 
event  action  by  the  shareholders  is  necessary.  In  cases  of  removal 
evidence  should  be  filed  with  the  Comptroller  to  show  that  the  new 
location  is  not  more  than  30  miles  distant  from  the  old.  Where 
removal  is  to  a  larger  place  the  capital  stock  must  be  increased  to 
minimum  required  for  said  place. 

FORM  OF  RESOLUTION  FOR  CHANGE  OF  NAME  OF  BANK  AND  CERTIFICATION 
OF  VOTE  TO  THE  COMPTROLLER  OF  THE  CURRENCY. 


National : —  Bank  of 


19- 


At  a  meeting  of  the  shareholders  of  the National bank 

of held  on ,  thirty  days',  notice  of  the  proposed  business 

having  been  given,  at  which  shareholders  were  present,  in  person  and 
by  proxy,  representing  —  shares  of  capital  stock,  it  was — 

Resolved,  That,  under  the  provisions  of  the  Act  of  May  1,  1886,  the 

corporate  name  of  the  National  bank  of  ; —  is  hereby 

changed  to  . 

The  above  resolution  was  adopted  by  the  following  vote: 


Name  of  shareholder. 


Residence. 


Name  of  Proxy. 


No.  of  shares. 


Total  number  of  shares  voted  in  favor  of  the  resolution 

Total  number   of  shares   voted    against   the   resolution   - 

Total  number  of  shares   represented   at  the  meeting  

Total  number  of  shares  of  capital  stock  of  the  bank 


521 

I  hereby  certify  that  the  above  is  a  true  and  correct  report  of  the 
vote  and  of  the  resolution  adopted  at  a  meeting  of  the  shareholders 
of  this  bank  held  on . 

[SEAL  OF  BANK.]  p 

President  or  Cashier. 

FORM    OF    RESOLUTION    OF    BOARD    OF    DIRECTORS    FOR    BOND    TRANSFER    IN 
CHANGE  OF    NAME   OF   BANK. 


19—. 


At  a  meeting  of  the  board  of  directors  of  the bank  of 


held  at  their  banking  house,  — ,  19 — ,  the  following  resolution  was 

adopted: 

Resolved,  That  the  Comptroller  of  the  Currency  be,  and  he  is  here- 
by authorized  to  withdraw  $ U.   S.  bonds,  deposited  with  the 

Treasurer  of  the   United   States  by  this  bank  to   secure  circulation, 
and   described   as  follows: 


of  the  loan  of  $ of  the  loan  of 

of  the  loan  of  $ of  the  loan  of 


and  that  the  Treasurer  of  the  U.  S.  be,  and  is  hereby  authorized  to 
assign  and  transfer  the  same  to  the  Treasurer  of  the  U.  S.  in  trust 

for  the  — i National   Bank   of   to   conform   to   change   of 

title. 

I  hereby  certify  that  the  above  is  a  true  extract  from  the  minutes 
of  said  meeting. 

[SEAL  OF  BANK.]  1 , 

Cashier  and  Secretary  of  the  Board  of  Directors. 

Note. — The  Treasurer's  receipts  for  the  bonds  proposed  to  be  with- 
drawn must  be  forwarded  (with  this  form  properly  filled)  to  the 
Comptroller  of  the  Currency. 


CHAPTER  VIII. 

Liquidation. 

Section  491.  General. 

492.  Authority  for  Liquidation. 

493.  Procedure. 

494.  Form  of  Resolution. 

495.  Certification  to  Comptroller. 

496.  Notice  to  Creditors. 

497.  Withdrawal  of  Bonds. 

498.  Prohibition  Against  New  Business. 

499.  Liquidating  Agent,  Appointment  and  Powers. 

500.  Reports  by  Liquidating  Agent  to  Comptroller. 

501.  Election  and  Powers  of  Officers. 

502.  Payment  of  Dividends  to  Shareholders. 

503.  Liquidation  to  Sell  Business  or  to  Reorganize. 

504.  Liquidation  by  Expiration  of  Charter. 

505.  Certification  of  Closing  by  Expiration  of  Charter — 

Form. 

§  491.  General.- The  closing  of  the  business  of  a  National  bank 
is  either  by  voluntary  liquidation  or  involuntarily  by  appointment 
of  a  receiver. 

The  closing  by  receivership  is  treated  fully  in  the  first  part  of 
this  work  under  the  section  of  the  Revised  Statutes  pertaining  to 
receivership. 

Voluntary  Liquidation  may  be  for  various  purposes :  an  Asso- 
ciation may  for  some  reason  wish  to  discontinue  business  before 
its  charter  expires,  or  on  expiration  of  its  charter,  without  renew- 
ing. In  either  case  the  object  may  be :  To  close  business ;  to  sell 
the  business;  to  reorganize  as  a  new  association,  or  to  consoli- 
date with  another  association.  Liquidation  for  purposes  of  con- 
solidation is  treated  under  Chapter  VI  on  consolidation,  but  the 
procedure  in  all  cases  is  practically  the  same. 

522 


523 

§  492.  Authority  for  Liquidation.-  The  law  authorizes  any 
National  bank  to  go  into  liquidation  by  a  vote  of  its  shareholders 
owning  two-thirds  of  its  stock.  (Eevised  Statutes,  5220.)  Noth- 
ing is  said  in  the  statute  about  the  consent  of  the  Comptroller  of 
the  Currency,  but  it  will  be  found  to  facilitate  the  proceedings  to 
give  him  notice  in  advance,  that  he  may  cause  an  examination  of 
the  bank  to  be  made  if  he  deems  it  necessary ;  for  until  he  is  satis- 
fied that  the  bank  is  solvent,  he  will  not  consent  to  the  withdrawal 
of  the  bonds  of  the  bank  deposited  with  the  U.  S.  Treasurer,  and, 
although  a  vote  may  have  been  taken  to  place  the  bank  in  liquida- 
tion, the  Comptroller  still  has  authority  to  appoint  a  receiver 
should  he  consider  such  action  called  for. 


§  493.  Procedure.— By  implication,  Section  5144  E.  S.  requires 
that  a  vote  of  the  stockholders  be  taken  at  a  meeting  called  for  the 
purpose  in  the  manner  provided  for  in  the  articles  of  association 
or  by-laws.  If  the  articles  are  in  the  usual  form  this  may  be  done 
by  publishing  notice  of  the  meeting  for  thirty  days  in  a  newspaper 
published  in  the  town,  city  or  county  where  the  bank  is  located,  or 
by  mailing  to  each  shareholder  notice  in  writing  thirty  days  before 
the  time  fixed  for  the  meeting.  The  notice  should  expressly  state 
that  the  purpose  of  the  meeting  is  to  consider,  and  to  vote  upon, 
the  question  of  placing  the  bank  in  liquidation.  It  is  necessary 
that  shareholders  owning  at  least  two-thirds  of  the  stock  vote  in 
favor  of  the  liquidation ;  the  shareholders  may  vote  by  proxy  at  this, 
as  well  as  at  other  meetings,  but  a  director,  other  officer,  clerk, 
teller  or  bookkeeper  of  the  bank  is  prohibited  by  law  from  acting  as 
such  proxy. 

The  shareholders  should  incorporate  in  the  resolution  for  liqui- 
dation a  provision  either  that  liquidation  shall  begin  immediately 
on  the  day  the  vote  is  taken,  or  at  a  determined  future  date. 

§  494.  Form  of  Resolution. — The  following  is  the  form  of  reso- 
lution for  liquidation  and  certification  of  vote  to  the  Comptroller 
of  the  Currency  and  notice  to  be  published,  also  form  of  oath  of 
publisher.     These  forms  are  furnished  by  the  Comptroller. 


524 


RESOLUTION    FOR    VOLUNTARY    LIQUIDATION. 

At  a  meeting  of  the  shareholders  of  The  National  Bank  of 

,  located  at  ,  held  on  ,  thirty  days'  notice  of  the 

proposed  business  having  been  given,  it  was 

Resolved,  That  the be  placed  in  voluntary  liquidation 

under  the  provisions  of  sections  5220  and  5221  of  the  United  States 
Revised  Statutes,  to  take  effect ;  and  that be  ap- 
pointed liquidating  agent  or  liquidation  committee  of  said  bank;  that 
liquidation  shall  be  conducted  in  accordance  with  law  and  under  the 
supervision  of  the  board  of  directors,  who  shall  require  a  suitable 
bond  to  be  given  by  the  said  agent  or  committee  in  an  amount  to  be 
fixed  by  the  board  of  directors;  that  the  said  liquidating  agent  or 
committee  shall  render  quarterly  reports  to  the  Comptroller  of  the 
Currency  on  the  1st  of  January,  April,  July,  and  October  of  each 
year  showing  the  progress  of  said  liquidation  until  said  liquidation 
is  completed;  that  said  liquidating  agent  or  committee  shall  render 
an  annual  report  to  the1  shareholders  on  the  date  fixed  in  the  articles 
of  association  for  said  annual  meeting,  at  which  meeting  the  share- 
holders may,  if  they  see  fit,  by  a  vote  representing  a  majority  of  the 
entire  stock  of  the  bank,  remove  the  liquidating  agent  or  committee 
and  appoint  another  in  place  thereof;  that  a  special  meeting  of  the 
shareholders  may  be  called  at  any  time  in  the  same  manner  as  if 
the  bank  continued  an  active  bank,  and  at  said  meeting  the  share- 
holders may,  by  a  vote  of  the  majority  of  the  stock,  remove  the  liqui- 
dating agent  or  committee;  that  the  Comptroller  of  the  Currency  is 
authorized  to  have  an  examination  made  at  any  time  into  the  affairs 
of  the  liquidating  bank  until  the  claims  of  all  creditors  have  been 
satisfied,  and  that  the  National  bank  examiner  will  be  compensated 
for  his  time  and  expense  in  making  the  examination  in  question. 

The  foregoing  resolution  was  adopted  by  the  following  vote,  repre- 
senting at  least  two-thirds  of  the  capital  stock  of  the  association,  no 
director,  other  officer,  or  employe  having  acted  as  proxy. 


Name  of  shareholder. 


Residence. 


Name  of  Proxy.    No.  of  shares 


525 


Stock  voted  against  resolution. 


Name  of  shareholder. 


Residence. 


Name  of  Proxy. 


No.  of  shares. 


Stock  not  represented  at  meeting. 


Name  of  shareholder. 


No.  of  shares. 


Total  number  of  shares  voted  in  favor  of  the  resolution,- 
Total  number  of  shares  voted  against  the  resolution,  — 
Total  number  of  shares  represented  at  the  meeting,  


Total  number  of  shares  not  represented  at  the  meeting, . 

Total  number  of  shares  of  capital  stock,  . 

I  hereby  certify,  under  authority  of  the  board  of  directors,  that 
the  foregoing  is  a  true  and  correct  report  of  the  vote  and  of  the 
resolution  adopted  at  a  meeting  of  the  shareholders  of  the  aforesaid 
bank  on  the  date  mentioned. 

[seal  of  bank.]  — ■ • , 

President  or  Cashier . 

Subscribed  and  sworn  to  before  me,  this  day  of  ,  A.  D. — . 

[seal  of  notary.] , 

Notary  Public. 

§  495.  Certification  to  Comptroller.—  The  evidence  to  be  fur- 
nished to  the  Comptroller  of  the  Currency  of  the  fact  of  liquida- 
tion is  a  copy  of  the  resolution  of  the  shareholders  certified  by  the 
cashier  or  president,  under  seal  of  the  bank,  that  shareholders  own- 
ing two-thirds  of  the  stock  have  voted  to  place  the  bank  in  liquida- 
tion, and  a  copy  of  the  notice  calling  the  meeting,  showing  date  of 
mailing  or  publication. 

§  496.  Notice  to  Creditors.— Notice  to  note-holders  and  other 
creditors  to  present  their  claims  for  payment  should  be  published, 


526 

as  required  by  Section  5221  of  the  Revised  Statutes,  for  a  period 
of  two  months  in  a  newspaper  published  in  the  city  of  New  York, 
and  also  in  a  newspaper  published  in  the  city  or  town  in  which 
the  bank  is  located.  Notice  in  a  weekly  paper  or  in  a  weekly  edition 
of  a  daily  paper  is  sufficient. 

When  publication  has  been  made  as  required  by  section  5221 
affidavits  of  the  publishers  should  be  sent  to  the  Comptroller  of 
the  Currency.     The  following  is  a  form  of  notice : 

The  National  Bank  ,  located  at  ,  in  the 

State  of  ,  is  closing  its  affairs.    All  note  holders   and  other 

creditors  of  the  association  are  therefore  hereby  notified  to  present 
the  notes  and  other  claims  for  payment. 


President  or  Cashier. 

Dated, ,  19—. 

The  following  is  a  form  of  affidavit  of  publication: 


AFFIDAVIT    OF    PUBLICATION. 


State  of 


County  of  ,  ss: 

,  being  duly  sworn,  deposes  and  says  that  he  is  the  publisher 

of  1,  a  newspaper  published   in   the  of  , 

county  of ,  State  of ,  and  that  the  annexed  advertisement 

of  the  Certificate  for  Voluntary  Liquidation  of  the  National 

Bank  of  — : has  appeared  in  each  issue  of  said  paper  for  a  period 

of  at  least  sixty  days,  beginning  the  — ■ day  of  — ——  and  end- 
ing the day  of  ,  19 — . 

Subscribed  and  sworn  to  before  me,  1 — ,  a  in  and  for 

the  State  and  County  aforesaid,  this day  of ,  19 — . 

[SEAL    OF   OFFICEB.] 

This  oath  is  to  be  sent  to  the  Comptroller  with  clipping  of  adver- 
tisement. 

§  497.  Withdrawal  of  Bonds. — The  bonds  can  be  withdrawn 
as  soon  as  the  liquidation  begins,  provided  the  Comptroller  of  the 
Currency  is  satisfied  that  the  bank  is  solvent,  but  the  bank  must 
first  deposit  with  the  Treasurer  of  the  United  States  sufficient  law- 
ful money  to  retire  all  its  outstanding  circulating  notes,  and  pay 
any  tax  due  on  circulation  and  charges  for  redemptions  over  the 
amount  to  the  credit  of  the  bank  in  the  five  per  cent,  redemption 


527 

fund.  Ordinarily,  the  five  per  cent,  fund  is  ample  to  meet  the  tax 
and  charges.  In  case  this  fund  is  more  than  sufficient  or  an  ex- 
cessive amount  is  deposited,  the  excess  will  be  returned  to  the 
depositing  bank.  This  deposit  must  be  made  within  six  months 
from  the  date  of  going  into  liquidation.     (Sec.  5222  R.  S.) 

§  498.  Prohibition  Against  New  Business. —  When  the  bank 
has  been  placed  in  liquidation  it  can  not  transact  any  new  business 
and  the  power  of  its  officers  to  bind  the  shareholders  is  only  that 
which  results  by  implication  from  the  duty  to  wind  up  and  close 
its  affairs.  (Richmond  v.  Irons,  121  U.  S.,  27;  Schroder  v.  Manu- 
facturers' National  Bank,  133  U.  S.,  67.) 

§  499.  Liquidating  Agent — Appointment  and  Powers. — When 
a  National  bank  has  been  placed  in  voluntary  liquidation  the  settle- 
ment of  its  affairs  devolves  by  law  upon  its  shareholders. 

The  National  Bank  Act  contains  no  provision  giving  the  specific 
manner  in  which  the  affairs  of  a  National  bank  shall  be  liquidated, 
and  no  reference  is  made  in  the  law  to  the  appointment  of  an  agent 
or  trustee  in  liquidation,  except  when  a  National  bank  has  been 
placed  in  the  hands  of  a  receiver  and  the  claims  of  all  creditors 
other  than  shareholders  have  been  satisfied. 

The  general  plan  is  for  the  shareholders  in  voting  to  place  a  Na- 
tional bank  in  liquidation  to  also  appoint  a  liquidating  agent  or 
committee,  and  the  United  States  Circuit  Court  of  Appeals  has 
held  (Jewett  v.  United  States,  100  Fed.  Rep.,  832)  that  while  no 
such  office  as  an  agent  in  liquidation  was  known  to  the  Statutes, 
yet  it  was  one  that  had  long  been  recognized  by  the  courts. 

The  liquidation  should  be  conducted  by  the  agent  in  accordance 
with  law  and  under  the  supervision  of  the  board  of  directors. 
The  vote  to  liquidate  and  the  appointment  of  a  committee  by  the 
shareholders  to  liquidate  the  bank  does  not  divest  the  directors  of 
their  general  power  and  control  over  the  management  of  the  bank. 

Unless  a  liquidating  agent  is  elected  by  the  shareholders,  the 
settlement  of  the  affairs  of  the  bank  would  appear  to  devolve  upon 
the  directors,  who  will  be  at  liberty  to  continue  one  or  more  of  the 


528 

officers  or,  in  lieu  thereof,  to  appoint  an  agent  for  the  purpose  of 
conducting  liquidating  proceedings. 

After  a  National  bank  has  gone  into  voluntary  liquidation  no 
further  supervision  of  its  affairs  is  conferred  upon  the  Comptroller 
by  law.  It  is  usual,  however,  for  the  banks  to  adopt  a  resolution 
providing  that  the  liquidating  agent  or  committee  shall  render 
quarterly  reports  to  the  Comptroller  showing  the  progress  of  the 
liquidation  until  it  is  completed.  The  filing  of  these  reports  is  of 
advantage  to  all  interested,  as  it  makes  a  permanent  record  of  the 
liquidation. 

A  creditor  of  a  National  bank  in  liquidation  has  the  right  to 
enforce  the  individual  liability  of  shareholders  provided  for  by  sec- 
tion 5151  of  the  United  States  Revised  Statutes  by  filing  a  bill  in 
equity  in  the  nature  of  a  creditor's  bill  against  the  shareholders  of 
the  bank  in  any  court  of  the  United  States  having  original  juris- 
diction for  the  district  in  which  the  bank  may  have  been  located  or 
established. 

Any  shareholder  of  a  National  bank  in  liquidation  who  is  dis- 
satisfied with  the  manner  in  which  liquidation  is  conducted,  has 
the  right  to  go  into  court  and  ask  for  the  appointment  of  a  receiver 
in  the  same  manner  as  a  shareholder  of  any  State  corporation  would 
be  so  authorized. 

All  obligations  of  the  bank  become  due  and  payable  when  the 
bank  is  legally  closed,  and  they  should  be  settled  immediately.  The 
assets  remaining  should  be  converted  into  money  as  promptly  as 
possible  and  distribution  made  pro  rata  among  the  shareholders. 

The  liquidating  agent  stands  in  the  same  relation  to  the  bank 
as  do  the  directors  during  its  active  existence;  that  is,  any  transac- 
tions in  connection  with  the  sale  or  other  disposition  of  assets,  and 
general  transactions  relating  to  liquidation,  should  be  effected  un- 
der the  name  of  the  association  by  the  liquidating  agent. 

§  500.  Reports  by  Liquidating  Agent  to  Comptroller. — 
The  form  of  resolution  for  adoption  by  the  shareholders  which  the 
Comptroller  supplies  provides  that  the  liquidating  agent  or  com- 
mittee shall  render  quarterly  reports  to  him  during  the  progress 
of  liquidation.    The  following  are  the  forms  of  reports: 


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§  501.  Election  and  Powers  of  Officers. — A  National  bank  that 
has  voted  to  go  into  liquidation  may  continue  to  elect  officers  and 
directors  for  the  purpose  of  effecting  liquidation,  but  after  the  ex- 
piration of  the  term  of  its  charter  the  stock  is  not  transferable  so 
as  to  give  the  transferee  the  right  to  share  in  the  election  of  direc- 
tors, and  such  transferee  not  being  a  shareholder  is  ineligible  as 
a  director  under  section  5145,  United  States  Eevised  Statutes. 
(Richards  v.  Attleboro  National  Bank,  148  Mass.,  187;  3  N.  B.  C, 
495.) 

After  a  National  bank  has  gone  into  liquidation  the  officers  have 
no  authority  to  bind  the  shareholders  by  the  transaction  of  any 
business  except  that  necessarily  involved  in  the  winding  up  of  its 
affairs  unless  such  authority  has  been  expressly  conferred  by  the 
shareholders.  (Schrader  v.  Manufacturers'  National  Bank,  133 
U.  S.,  67;  Richmond  v.  Irons,  121  IT.  S.,  27.) 

§  502.  Payment  of  Dividends  to  Shareholders. —  Where  full  set- 
tlements with  shareholders  are  not  effected  at  once,  dividends  should 
be  paid  to  the  shareholders  from  the  assets  collected  by  the  liqui- 
dating agent  and  the  amount  thereof  endorsed  on  the  stock  cer- 
tificates, when  presented.  When  the  assets  have  been  fully  paid  to 
shareholders  the  certificates  should  be  surrendered  and  cancelled. 

§  503.  Liquidating  to  Sell  Business  or  to  Reorganize. — Where 
a  bank  is  closed  for  the  purpose  of  selling  its  business  to  another 
bank,  or  in  contemplation  of  reorganization,  all  of  the  property 
of  the  bank  may  be  legally  disposed  of  at  private  sale  with  the 
unanimous  consent  of  shareholders,  provided,  the  claims  of  credi- 
tors having  been  paid  or  provided  for. 

Any  shareholder,  however,  who  is  not  satisfied  with  the  private 
offer  may  insist  upon  a  public  auction. 

Where  the  directors  representing  a  majority  of  the  stock  of  the 
closed  bank  organize  a  new  bank  they  are  at  liberty  as  directors  of 
the  new  association  to  buy  the  property  of  the  closed  bank  at  pub- 
lic sale,  but  have  no  right  to  buy  it  at  a  private  sale  at  a  price 
which  they  may  put  upon  it  themselves.  Where,  however,  the 
price  is  a  fair  one  and  shareholders  are  allowed  to  participate  in 
the  reorganization,  it  is  not  likely  that  a  court  would  order  a  pub- 


533 

lie  sale,  there  being  no  reasonable  prospect  of  benefit  from  such 
public  sale. 

§  504.  Liquidation  by  Expiration  of  Charter  — The  settlement 
of  the  affairs  of  a  bank  closed  by  expiration  of  the  corporate  ex- 
istence is  the  same  as  though  the  bank  had  been  placed  in  liquida- 
tion by  vote  of  shareholders  during  its  legal  life.  Usually  the 
board  of  directors  is  kept  up  to  superintend  the  liquidation,  or  a 
liquidating  agent  or  committee  may  be  appointed  for  the  purpose. 

No  action  on  the  part  of  shareholders  is  required  to  terminate 
the  corporate  existence  of  a  National  bank  which  has  reached  the 
end  of  its  corporate  life  of  twenty  years.  Expiration  legally  results 
from  failure  to  effect  extension. 

Bonds  on  deposit  to  secure  circulation  may  be  withdrawn  at  any 
time  within  six  months  of  the  date  of  expiration  by  depositing  law- 
ful money  for  the  redemption  of  outstanding  notes  of  the  bank. 

The  corporate  existence  of  a  National  bank  the  charter  of  which 
has  expired  by  limitation  is  extended  by  Act  of  July  12,  1882,  for 
the  purpose  of  effecting  liquidation  and  only  for  that  purpose. 

§  505.  Certification  of  Closing  by  Expiration  of  Charter — Form. 

— Certification  of  expiration  of  a  bank's  corporate  existence  must 
be  made  to  the  Comptroller  of  the  Currency,  under  seal  of  the 
association,  by  the  president  or  cashier,  and  notice  to  creditors 
that  the  association  is  closing  published  in  a  New  York  and  local 
newspaper  for  a  period  of  two  months  as  in  other  cases  of  liquida- 
tion. 

certificate  of  expiration  of  corporate  existence. 

National  Bank  . 


To  the  Comptroller  of  the  Currency, 

Washington. 

Sir:     It  is  hereby  certified  that  the  corporate  existence  of  , 

located  at  ,  in  the  State  of  — ,  having  expired  at  close  of 

business  on  the day  of ,  ,  the  bank  is  now  closing  its 

affairs  under  the  provisions  of  section  7  of  the  act  of  July  12,  1882. 


534 

In  testimony  whereof  I  have,  by  instruction  of  the  board  of  directors 
of  said  association,  hereto  subscribed  my  name  and  affixed  the  seal  of 
said  association  at ,  aforesaid,  the  day  and  year  above  written. 

[seal  of  bank.]  ■ , 

President  or  Cashier. 

NOTICE. 

The  National  Bank  ,  located  at  ,  in  the 

State  of ,  is  closing  up  its  affairs,  its  corporate  existence  having 

expired  at  close  of  business  on  the day  of , .    All  note 

holders  and  others,  creditors  of  said  association,  are  therefore  hereby 
notified  to  present  the  notes  and  other  claims  against  the  association 
for  payment. 


President  or  Cashier. 
Dated , . 

Note. — The  foregoing  notice  to  be  published  for  a  period  of  two 
months  in  a  newspaper  in  the  city  of  New  York,  and  also  in  a  news- 
paper published  in  the  place  in  which  the  bank  is  located.  (See  sec. 
5221,  Rev.  Stat.)  Certificates  of  the  publishers  that  the  required  pub- 
lication has  been  made,  together  with  a  slip  containing  notice  from 
one  issue  of  each  paper,  should  be  sent  to  the  Comptroller  of  the 
Currency. 

The  settlement  of  the  affairs  of  a  bank,  at  expiration  of  charter, 
should  be  effected  in  the  same  manner  as  in  the  case  of  liquidation 
by  resolution  of  shareholders. 


CHAPTER  IX. 

Extension  of  Corporate  Existence. 

Section  506.  Provision  for  Extension. 

507.  Date  of  Expiration  of  Old  Charter. 

508.  Application  for  Extension — Forms. 

509.  Consent  of  Shareholders — Forms. 

510.  Certificate  of  President  or  Cashier. 

511.  Authority  to  Sign. 

512.  Certificate  of  Extension. 

513.  Circulating  Notes. 

514.  Bond  Deposit  with  U.  S.  Treasurer. 

515.  Dissenting  Shareholders. 

516.  Officers'  Bonds. 

517.  Re-extension  of  Corporate  Existence — Forms. 

518.  Reorganization  Instead  of  Extension. 

519.  Same — Name  of  New  Bank. 

520.  Same — Procedure. 

521.  Same— Liquidation  of  Old  Association. 

§  506.  Provision  for  Extension. — The  Act  of  Congress  approved 
July  12,  1882,  provided  that  any  National  banking  association,  at 
any  time  within  the  two  years  next  previous  to  the  date  of  the 
expiration  of  its  corporate  existence  under  present  law,  and  with 
the  approval  of  the  Comptroller  of  the  Currency,  may  extend  its 
period  of  succession,  by  amending  its  articles  of  association,  for  a 
term  of  not  more  than  twenty  years. 

The  Act  of  Congress  approved  April  12,  1902,  authorizes  the 
Comptroller  of  the  Currency  in  the  manner  provided  by,  and  under 
the  conditions  and  limitations  of  the  Act  of  July  12,  1882,  to 
extend  for  a  further  period  of  twenty  years  the  charter  of  any 
National  banking  association  extended  under  said  act  which  shall 
desire  to  continue  its  existence  after  the  expiration  of  its  charter. 

535 


536 

The  course  of  procedure,  on  the  part  of  an  association,  in  effect- 
ing a  second  extension  of  charter  is  the  same  as  in  the  case  of  a 
first  extension. 

§  507.  Date  of  Expiration  of  Old  Charter.— The  date  of  expira- 
tion of  the  old  charter  is  determined  by  the  date  of  execution  of 
the  organization  certificate,  as  Section  5136  of  the  Eevised  Statutes 
provides  that  all  associations  organized  under  it  shall  have  suc- 
cession for  twenty  years  from  the  date  of  the  execution  of  the  or- 
ganization certificate.  If  the  paper  is  lost,  or  the  date  in  any  way 
uncertain,  information  can  be  obtained  on  application  to  the  Comp- 
troller of  the  Currency. 

§  508.  Application  for  Extension — Forms. — Under  the  Act  of 
July_  12,  1882,  and  the  regulations  of  the  Comptroller's  office, 
banks  are  permited  to  file  their  application  for  extension  with  the 
proper  papers  at  any  time  within  two  years  prior  to  their  expira- 
tion ;  but  usually  application  for  extension  is  not  made  until  within 
a  few  months  prior  to  expiration  of  charter,  and  this  gives  the 
Comptroller  sufficient  time  to  satisfy  himself  as  to  the  condition 
of  the  bank,  and  upon  request  the  necessary  blanks  will  be  sent 
from  that  office.  The  formal  amendment,  certificate  relative 
thereto,  and  request  for  approval  to  be  executed  and  filed  with 
the  Comptroller  are  as  follows: 

AMENDMENT   OF    ABTICLES    OF    ASSOCIATION    OF    NATIONAL    BANK. 

In  accordance  with  and  in  pursuance  of  the  provisions  of  "An  act 
to  enable  National  banking  associations  to  extend  their  corporate  ex- 
istence, and  for  other  purposes,"  approved  July  12,  1882,  we,  the  un- 
dersigned, shareholders  of  "The ,"  located  at  ,  in 

the  county  of and  State  of ,  owning  the  number  of  shares 

of  the  capital  stock  of  said  association  set  opposite  our  respective 
names,  aggregating  not  less  than  two-thirds  of  the  stock  of  said  asso- 
ciation, do  hereby  consent  and  agree  that  the  article  of  the 

articles  of  association  of  said  National  banking  association  be,  and 
is  hereby,  amended  to  read  as  follows: 

"This  association  shall  continue  until  close  of  business  on  

,  19 — ,  unless  sooner  placed  in  voluntary  liquidation  by  the  act 


537 

of  its  shareholders  owning  at  least  two-thirds  of  its  stock,  or  otherwise 
dissolved  by  authority  of  law." 

In  witness  whereof  we,  the  undersigned,  have  hereto  set  our  hands. 


Date  of 
signing. 


Signature   of   share- 
holder. 


Address. 


Signature   of   proxy. 


Xo.   of  shares 


CERTIFICATE. 

To  the  Comptroller  of  the  Currency, 

Washington,  D.  C. 
Sir:     In  pursuance  of  the  provisions  of  "An  act  to  enable  National 
banking  associations  to  extend  their  corporate  existence,  and  for  other 
purposes,"  approved  July  12,  1882,  I  hereby  certify  that  shareholders 
owning  not  less  than  two-thirds  of  the  capital  stock  of  "The 


•"  have  consented  in  writing  to  the  extension  of  the  charter  of 
said  association;  that  the  signatures  to  the  attached  amendment  of  the 
articles  of  association,  executed  in  duplicate,  are  the  true  and  correct 
signatures  of  said  shareholders,  or  of  their  lawfully  appointed  at- 
torneys, and  that  one  of  the  instruments,  in  all  respects  like  the  other, 
is  on  file  in  the  bank. 

The  foregoing  certificate  is  made  under  seal  of  the  association  in 
accordance  with  a  resolution  of  the  board  of  directors  adopted  at  a 

meeting  held  on  the day  of ,  19—,  in  which  the  president 

or  cashier  was  also  authorized  to  make  an  application  for  the  approval 
of  the  amended  articles  of  association,  a  copy  of  which  resolution  has 
been  recorded  on  the  minute  book  of  the  bank. 

[seal  of  bank.]  — i 

President  or  Cashier. 

(The  above  certificate  should  not  be  made  prior  to  date  on  which 
the  amendment  is  last  signed.) 


REQUEST   FOR   APPROVAL. 

The  Comptroller  of  the  Currency  is  hereby  requested  to  approve  the 
foregoing  amendment  of  the  articles  of  association  of  said  bank,  ex- 
tending its  corporate  existence  for  twenty  years,  pursuant  to  the  Act 
of  Congress  entitled  "An  Act  to  enable  National  banking  associations 


538 

to  extend  their  corporate  existence,  and  for  other  purposes,"  approved 
July  12,  1882. 


President  or  Cashier. 

§  509.  Consent  of  Shareholders — Forms.— The  law  does  not 
provide  that  a  meeting  of  the  shareholders  shall  be  held,  as  it  is 
necessary  only  to  secure  the  written  consent  of  those  representing 
two-thirds  of  the  stock,  and  this  may  be  done  by  sending  in  ad- 
vance to  shareholders  at  a  distance  a  power  of  attorney  to  be  signed 
and  returned,  any  person  competent  being  empowered  to  act  as 
attorney.    The  following  form  may  be  used  for  this  purpose : 

PROXY   FOB   USE   IX   EXTENDING   CORPORATE   EXISTENCE   OF    NATIONAL   BANKS. 

Know  all  men  by  these  presents,  that  I, ' — ,  of  , 

hereby  constitute  and  appoint  irrevocably  > my  true  and 

lawful  attorney,  for  me  and  in  my  name  and  stead  to  sign  all  necessary 
papers  in  connection  with  the  extension  of  the  corporate  existence  of 

the ' ,  under  the  Act  of  Congress  approved  July  12,  1882, 

or  any  amendment  of  said  act,  and  I  hereby  consent  that  the 

article  of  the  articles  of  association  of  the be  so  amended 

as  to  read  as  follows: 

"This  association  shall  continue  until  close  of  business  on  , 

unless  sooner  placed  in  voluntary  liquidation  by  the  act  of  its  share- 
holders owning  at  least  two-thirds  of  its  stock,  or  otherwise  dissolved 
by  authority  of  law." 

I  further  grant  unto  my  said  attorney  full  power  and  authority  to 
act  in  and  concerning  the  premises  as  fully  and  effectually  as  I 
might  do  if  personally  present. 

In  witness  whereof  I  have  hereunto  set  my  hands  this  day  of 

,  in  the  year  one  thousand  nine  hundred  and  . 


Signed  in  presence  of  two  witnesses: 


AUTHORITY   OF   BEPBESENTATIVE  OF  OTHEB    COBPOBATION    CONSENTING   TO 
EXTENSION    OF   CORPORATE   EXISTENCE    OF    NATIONAL   BANK. 


539 
At  a  meeting  of  the of  the of ,  held  on  the 


day  of  ,  it  was  voted  that  — ■ be,  and  he  is  hereby, 

appointed  irrevocably  as  its  attorney,  with  power  of  substitution,  to 

consent  to  and  sign,  in  its  behalf,  the  amendment  of  the  article 

of  the  articles  of  association  of  The  — ■ National Bank  , 

said  amendment  reading  as  follows: 

"This  association  shall  continue  until  close  of  business  on  > , 

unless  sooner  placed  in  voluntary  liquidation  by  the  act  of  its  share- 
holders owning  at  least  two-thirds  of  its  stock,  or  otherwise  dissolved 
by  authority  of  law." 

"A  true  copy  from  the  records." 

Attest:  .     [Affix  seal.] 

These  powers  of  attorney,  signed  by  the  shareholders,  should  not 
be  sent  to  the  Comptroller  with  the  amendment  to  the  articles  of 
association,  but  retained  in  the  files  of  the  bank. 

If  preferred,  a  shareholders'  meeting  may  be  called  for  a  con- 
venient date  to  enable  the  shareholders  to  sign  the  necessary  papers. 

Notice  of  the  meeting  may  be  sent  by  mail  to  each  shareholder, 
or  given  by  publication.  At  this  meeting  the  shareholders  may 
appear  in  person  or  by  attorney,  the  power  given  to  the  latter  being 
similar  in  form  to  that  inserted  above. 

§  510.  Certificate  of  President  or  Cashier.— The  amendment, 
certified  by  president  or  cashier,  that  shareholders  of  two-thirds  of 
the  stock  have  consented  in  writing  to  the  extension  and  the  re- 
quest for  approval  should  be  executed,  and  transmitted  to  the 
Comptroller,  at  least  two  months  previous  to  the  expiration  of  the 
corporate  existence  of  the  bank,  in  order  that  the  Comptroller  may 
have  sufficient  time  to  cause  the  special  examination  to  be  made, 
as  required  by  Section  3  of  the  Act  of  July  12,  1882,  and  to  enable 
the  bank  to  comply  with  possible  conditions  before  the  time  for 
renewal  of  charter. 

§  511.  Authority  to  Sign.—  If  any  shares  of  the  bank  stand  in 
the  name  of  administrators,  executors,  trustees,  or  guardians,  and 
it  becomes  necessary  to  have  the  consent  of  the  owners  of  these 
shares  to  make  up  the  majority  required  to  authorize  the  amend- 
ment, duly  certified  copies  of  the  legal  appointment  of  such  ad- 


540 

ministrators,  executors,  trustees,  or  guardians  should  be  obtained 
and  filed  with  the  bank's  records  relating  to  the  extension. 

"When  stock  stands  in  the  name  of  an  assignee,  who  signs  the 
amendment,  there  must  be  evidence  showing  that  the  shares  of 
stock  have  been  formally  transferred  to  him,  as  such  assignee,  on 
the  books  of  the  bank.  When  the  amendment  is  signed  by  an 
attorney  acting  for  shareholders,  properly  executed  power  of  at- 
torney should  be  required. 

§  512.  Certificate  of  Extension.— After  receipt  of  extension 
papers  the  Comptroller  will  order  a  special  examination  at  the 
expense  of  the  bank,  and  if  its  condition  is  found  to  be  satisfactory 
a  certificate  approving  extension  will  be  issued  on  the  date  of  ex- 
piration of  the  existing  charter. 

§  513.  Circulating  Notes.— The  law  requires  that  circulating 
notes  issued  to  the  bank  after  the  new  period  of  succession  begins 
shall  be  of  different  devices  from  those  issued  before;  and  this 
necessitates  the  procuring  of  new  plates,  which  are  prepared  at 
the  expense  of  the  bank. 

A  blank  to  enable  banks  to  order  the  preparation  of  plates  for 
the  printing  of  new  circulation  will  be  furnished  by  the  Comp- 
troller, and  the  order  should  be  made  out  and  sent  with  the  exten- 
sion papers  so  that  the  plates  may  be  engraved  and  the  currency 
printed  to  be  ready  when  the  charter  is  renewed. 

The  following  is  the  form  of  order  for  plates  and  circulation : 

EXTENSION  OF  CHABTEE — ORDER  FOR  TLATES  AND  CrRCULATION. 

Charter  No.  ■. 


National  Bank  — , 

,  19— 

To  the  Comptroller  of  the  Currency. 

Sir:  As  the  corporate  existence  of  this  bank  is  to  be  legally  extended 
for  20  years,  you  are  requested  to  have  new  plates  engraved,  the  cost 
to  be  paid  upon  demand,  and  circulating  notes  printed  therefrom,  as 
follows: 


541 


No. 

of  sheets  ordered. 

Denomination  on  sheets 

Value   per 
sheet. 

Amount  of  order. 

$1,   $1,   $1,   $1 

$2,    $2,    $2,    $2 

$5,    $5,    $5,    $5 

$4 
8 
20 
40 
50 
250 

$ 

$10,    $10,   $10,    $10 

$10,    $10,    $10,    $20) 

$50,    S50,    $50,    $100 

Total 

Respectfully, 

Cashier. 

Note.— The  act  of  July  12,  1882,  requires  that  circulating  notes  issued 
to  banks  subsequent  to  extension  of  corporate  existence  shall  bear  such 
devices  as  shall  make  them  readily  distinguishable  from  prior  issues. 

The  act  of  October  5,  1917,  provides  for  the  issuance  of  $1  and  $2 
notes,  repealing  the  act  of  June  3,  1864,  which  prohibited  national  banks 
from  being  furnished  with  notes  of  less  denomination  than  $5  after 
the  resumption  of  specie  payments. 

Circulation  may  be  ordered  from  any  one  or  more  of  the  plates 
listed  above,  but  no  bank  shall  receive  or  have  in  circulation  at  any 
one  time  more  than  $25,000  in  notes  of  the  denominations  of  $1  and  $2. 

The  restriction  as  to  the  issue  of  $5  notes  to  one-third  of  a  bank's 
circulation  has  been  repealed,  and  notes  of  that  denomination  may  be 
issued  in  any  amount  desired  not  in  excess  of  the  capital  stock 
against  the  deposit  of  bonds. 

It  will  ordinarily  require  about  40  days  to  engrave  the  plate  and 
to  print  circulating  notes,  but  the  order  will  not  be  acted  upon  until 
either  bonds  are  deposited  for  circulation  or  a  draft  in  payment  of 
cost  of  engraving  is  received  by  the  Comptroller. 

Bank  plates  cost  $130  each  for  originals  and  $120  each  for  dupli- 
cates when  the  originals  are  worn  out. 

This  order  should  accohipany  the  amendment  providing  for  the  ex- 
tension of  the  corporate  existence  of  the  association. 

The  following  instructions  should  be  strictly  observed :  The  date 
on  which  each  shareholder  or  his  attorney  signs  the  amendment 
should  be  entered  in  the  column  for  that  purpose.  An  attorney 
representing  several  shareholders  need  sign  but  once  on  a  page,  if 
the  names  of  shareholders  are  bracketed.  Residence  and  number 
of  shares  of  each  shareholder  consenting  to  the  extension  must 
be  given. 


542 

§  514.  Bond  Deposit  with  U.  S.  Treasurer.-  No  transfer  of  bonds 
is  necessary,  as  the  extended  association  is  in  all  respects  identi- 
cally the  same  as  before  extension,  being  placed  in  the  same  posi- 
tion as  if  the  law  had  allowed  it  at  the  outset  forty  years  from  the 
date  of  its  organization,  of  winch  twenty  have  expired. 

§  515.  Dissenting  Shareholders.—  Section  5  of  the  Act  of  July 
12,  1882,  conserves  the  interest  of  shareholders  not  desiring  to 
continue  their  connection  with  the  bank,  but  desiring  to  withdraw 
and  to  be  paid  the  surrender  value  of  their  stock.  The  act  provides 
that  notice  of  intention  to  withdraw  shall  be  given  to  the  di- 
rectors within  thirty  days  from  the  date  of  issue  of  certificate  au- 
thorizing extension  of  the  charter,  and  that  a  committee  of  ap- 
praisal shall  be  appointed — one  member  by  the  withdrawing  share- 
holder, one  by  the  bank,  and  a  third  by  the  two.  The  bank  and  the 
dissenting  shareholder  may  select  as  members  of  the  committee 
expert  accountants  or  any  other  persons  competent  to  perform  the 
duties  of  appraisers.  In  case  the  value  fixed  is  unsatisfactory  to 
the  shareholder,  he  may  appeal  to  the  Comptroller  of  the  Cur- 
rency, whose  appraisal  shall  be  final  and  binding.  The  right  of 
appeal  is  not  given  to  the  bank.  In  case  the  valuation  fixed  by 
the  Comptroller  exceeds  the  amount  fixed  by  the  committee,  the 
expense  of  reappraisal  must  be  borne  by  the  bank;  otherwise  by 
the  shareholder  appealing.  The  law  makes  no  provision  for  pay- 
ment of  expenses  incident  to  the  first  appraisal;  hence  it  is  in- 
cumbent upon  the  withdrawing  shareholder  and  the  bank  to  de- 
termine this  question.  The  shares  appraised  and  surrendered  must, 
after  due  notice,  be  sold  at  public  sale  within  thirty  days  after 
the  final  appraisal. 

Generally  speaking,  the  market  price  of  stock  represents  the 
surrender  value,  although,  in  some  instances,  the  market  price 
may  be  above  or  below  the  actual  value  of  the  stock.  The  proper 
course  to  pursue  is  to  have  a  very  careful  examination  made  of 
the  assets,  taking  into  consideration  the  actual  value  of  items 
exceeding  the  book  value,  and  deducting  items  admittedly  worth- 
less. The  question  of  "good  will"  is  not  to  be  considered,  al- 
though it  may  be  of  material  value  to  a  bank  continuing  business. 


543 


§  516.  Officers'  Bonds.— When  the  corporate  existence  of  a  Na- 
tional bank  is  extended,  the  renewal  of  bonds  of  officers  and  em- 
ployes should  have  consideration. 

§  517.  Re-extension  of  Corporate  Existence — Forms.—  The  Act 

of  Congress  approved  April  12,  1902,  provides  that  the  Comp- 
troller of  the  Currency  may,  in  the  manner  provided  by  and  under 
the  conditions  and  limitations  of  the  Act  of  July  12,  1882,  extendi 
for  a  further  period  of  20  years  the  charter  of  any  National  bank- 
ing association  extended  under  said  act  which  shall  desire  to  con- 
tinue its  existence  after  the  expiration  of  its  charter.  The  form 
of  amendment  and  certificate  follows: 


RE-EXTENSION    OF    CHARTER — AMENDMENT    OF    ARTICLES    OF    ASSOCIATION    OF 

NATIONAL    BANK. 

In  accordance  with  and  in  pursuance  of  the  provisions  of  "An  Act 
to  enable  National  banking  associations  to  extend  their  corporate 
existence,  and  for  other  purposes,"  approved  July  12,  1882,  and  the 
amendment  approved  April  12,  1902,  we,  the  undersigned,  shareholders 
of  "The ,"  located  at  ,  in  the  county  of  


and   State   of 


-,   owning  the   number   of   shares    of   the   capital 


stock  of  said   association   set   opposite   our  respective  names,   aggre- 
gating not  less  than  two-thirds  of  the  stock  of  said  association,  do 

hereby  consent  and  agree  that  the  —  article  of  the  articles  of 

association  of  said  National  banking  association  be,  and  is  hereby, 
amended  to  read  as  follows: 

"This  association  shall  continue  until  close  of  business  on  ■ — 

>,   19 — ,   unless   sooner   placed   in   voluntary   liquidation   by   the 


act  of  its   shareholders   owning  at  least   two-thirds   of   its   stock,  or 
otherwise  dissolved  by  authority  of  law." 

In   witness   whereof   we,   the   undersigned,   have   hereunto   set   our 
hands. 


Date    of 
signing. 


Signature   of   share- 
holder. 


Signature    of    proxy 


No.    of 
shares. 


544 

,  19—. 

To  the  Comptroller  of  the  Currency, 

Washington,  D.  C. 

Sir:  In  pursuance  of  the  provisions  of  "An  Act  to  enable  National 
Banking  associations  to  extend  their  corporate  existence,  and  for 
other  purposes,"  approved  July  12,  1882,  and  the  amendment  approved 
April  12,   1902,   I   hereby   certify  that  shareholders   owning   not  less 

than  two-thirds   of  the  capital   stock  of   "The   ,"   have 

consented  in  writing  to  the  re-extension  of  the  charter  of  said  asso- 
ciation, that  the  signatures  to  the  attached  amendment  of  the  articles 
of  association,  executed  in  duplicate,  are  the  true  and  correct  signa- 
tures of  said  shareholders,  or  of  their  lawfully  appointed  attorneys, 
and  that  one  of  the  instruments,  in  all  respects  like  the  other,  is  on 
file  in  the  bank. 

The  foregoing  certificate  is  made  under  seal  of  the  association  in 
accordance  with  a  resolution  of  the  board  of  directors  adopted  at  a 
meeting  held  on  the  —  day  of  ,  19 — ,  in  which  the  presi- 
dent, or  cashier,  was  also  authorized  to  make  an  application  for  the 
approval  of  the  amended  articles  of  association,  a  copy  of  which  reso- 
lution has  been  recorded  on  the  minute  book  of  the  bank. 

[SEAL    OF    BANK.]  , 

President  or  Cashier. 

(The  above  certificate  should  not  be  made  prior  to  date  on  which 
the  amendment  is  last  signed.) 

The  Comptroller  of  the  Currency  is  hereby  requested  to  approve 
the  foregoing  amendment  of  the  articles  of  association  of  said  bank, 
re-extending  its  corporate  existence  for  twenty  years,  pursuant  to 
the  Act  of  Congress  entitled  "An  act  to  provide  for  the  extension  of 
the  charters  of  National  banks,"  approved  April  12,  1902. 

[SEAL   OF    BANK.]  , 

President  or  Cashier. 

The  other  forms  are  similar  to  those  used  in  connection  with  the 
original  or  first  extension  of  charter. 

§  518.  Reorganization  Instead  of  Extension.—  It  may,  however, 
be  deemed  best  by  those  owning  the  controlling  stock  in  a  Na- 
tional bank  about  to  expire  not  to  avail  themselves  of  the  fore- 
going method  of  extension,  but  may  prefer  reorganization.  There 
are  obvious  reasons  for  this.  For  example :  In  a  twenty  years'  life 
the  personnel  of  the  stockholders  of  an  association  undergoes  great 


545 

changes.  The  stock  which  was  originally  in  the  hands  of  active 
resident  business  men,  who  brought  custom  and  business  to  the 
bank,  by  various  vicissitudes  falls  into  the  possession  of  widows, 
heirs,  and  non-residents,  whose  only  interest  in  the  institution  is 
to  draw  dividends.  The  active  stockholders  remaining  in  such 
associations  will  doubtless  prefer  in  many  instances  to  let  the  old 
association  expire,  and,  with  their  proportion  of  the  capital,  joining 
with  themselves  other  new  capitalists  such  as  they  may  think  will 
add  strength,  form  a  new  association  to  occupy  the  place  vacated 
by  the  one  which  has  expired. 

§  519.  Same — Name  of  New  Bank.— The  proviso  m  Section  5 
of  the  Act  of  July  12,  1882,  prevents  the  use  of  the  old  name  for 
a  new  association  unless  all  the  shareholders  in  the  old  bank  are 
tendered  shares  in  the  new  bank  proportionately  to  those  they 
held  in  the  old;  therefore  unless  this  is  done  it  will  be  necessary 
to  select  a  title  materially  different  from  that  of  the  expiring 
association,  as  the  Comptroller  otherwise  will  not  give  his  approval. 

Furthermore,  the  Comptroller  does  not  look  with  favor  on  the 
elimination  of  shareholders  without  cause,  and  may  refuse  to  issue 
a  new  charter  on  this  ground. 

§  520.  Same — Procedure.—  The  new  associates  should  make  ap- 
plication to  the  Comptroller  for  authority  to  organize,  and  upon 
receipt  of  advice  of  approval  and  of  organization  blanks  they  should 
execute  articles  of  association,  organization  certificate,  oath  of 
directors,  and  file  these  papers,  with  an  order  for  circulation,  in 
the  office  of  the  Comptroller  of  the  Currency  about  two  months 
prior  to  the  expiration  of  the  existence  of  the  old  bank.  Fifty  per 
cent,  of  the  capital  should  be  paid  in  and  certified  to  the  Comp- 
troller some  time  before  the  old  bank  expires. 

As  circulating  notes  can  not  be  delivered  under  forty-five  days 
from  date  of  issue  of  certificate  authorizing  the  bank  to  begin  busi- 
ness, it  may  be  found  advisable  to  complete  the  organization  a  suf- 
ficient time  in  advance  of  the  expiration  of  the  charter  of  the  old 
bank  and  opening  of  the  new  to  insure  the  delivery  of  notes  at 
that  time. 
35 


546 

The  shareholders  of  the  new  bank  can  put  into  it  moneys  they 
derive  from  the  old.  The  assets  of  the  old  bank  can  be  sold  in 
such  manner  by  its  directors  as  will  realize  the  most  for  its  share- 
holders, and  generally  it  is  advantageous  to  sell  to  the  new  bank 
all  that  can  be  legally  taken  by  it. 

No  stockholder  of  the  old  bank  can  be  compelled  to  take  stock 
in  the  new  bank.  The  transfer  of  deposits  from  the  old  bank  to 
those  of  the  new  should  be  made  by  check  or  by  agreement  of  the 
new  bank  to  honor  checks  of  depositors  in  the  old  bank,  any  de- 
positor being  at  liberty  to  withdraw  his  deposit  either  before  or 
after  the  change. 

A  set  of  new  books,  of  course,  should  be  opened  by  the  new 
association. 

§  521.  Same — Liquidation  of  Old  Association. — The  method  of 
liquidating  the  old  bank  which  goes  out  on  expiration  of  charter 
is  given  in  the  chapter  on  Liquidation. 


General  Index 


A 

PAGE 

Abstraction — Of  bank's  funds 170 

Acceptances — Bankers,  definition  of  245,  266 

Bankers,  discount  of  245 

Bankers,  exchange  charges   240 

Bankers,  open  market  purchases  of 265 

Bankers,  secured  by  bill  of  sale 267 

Bills  of  exchange,  negotiability  of  252,  329 

Bills  of  sale,  acceptances  secured  by 267 

Bills  payable  with  attorney's  fees  or  collection  charges...  328 

Branch  of  Reserve  Bank,  purchased  by 268 

Corporations  in  foreign  banking  business 324 

Demand  and  sight  bills,  due  date  259 

Differential  as  to   253 

Discount  of  252 

Documents  attached  256 

Documents  not  attached  264 

Dollar  exchange   261,  263 

Domestic   254,  264 

Drafts  drawn  abroad  and  secured  by  foreign  warehouse 

receipt   255 

Drafts  drawn  on  sales  corporations 246 

Drafts  payable  with  interest 330 

Drawee,  acceptance  by   268 

Drawee,  bills  payable  to  the  order  of 329 

Excess  of  10  per  cent 254,  255,  258 

Export  of  goods  258 

Foreign   253,  255,  262,  274 

Foreign  correspondents 257 

Idenification  of  specific  goods  257 

Importation  of  goods  254 

Indorsed  by  member  bank  in  another  district,  discount  of.   252 

Indorsement  on  bill  of  exchange  268 

Limitations  of  10  per  cent 254,  255,  258 

547 


548 

PACT 

Acceptances— Members  banks' 252,  253,  256,  258,  261,  264 

Member  banks,  purcbase  of  own 264 

Non-member  trust  company  273 

Open  accounts  of  foreign  purchasers 254 

Open  market  purchases  of  265 

Presentment  of  bills  for  acceptance  329 

Qualified    , 328 

Renewals  of  252,  259 

Security  for  255,  259 

Shipment  by  corporation  to  agent 259 

Shipment  of  goods 258 

Sight  drafts,  due  date 259 

Sight  drafts  accepted  payable  at  a  future  date 329 

Single-name  paper   268 

Stamp  tax  on 258 

Trade,  bills  drawn  against  actually  existing  values 250 

Trade,  definition  of  266 

Trade,  discount  if  paid  at  maturity 249 

Trade,  discount  if  paid  before  maturity 329 

Trade,  of  retailers 246 

Trade,  open  market  purchases  of 265 

Trade,  providing  for  extension  of  time 329 

Trust  receipts  as  security  for 257 

Waiver  of  demand,  notice  and  protest 328 

Warehouse  receipts,  as  security  for  255,  2.56,  257 

Where  payable 328 

Accommodation  paper  15 

Accounts — Foreign  branches  of  national  banks  307 

Actually  Existing  Values 106 

Administrator — As  shareholder  of  national  bank 437 

Liability  of  as  shareholder  64 

Power  of  national  banks  to  act  as 232 

Advertisement — To  creditors  of  insolvent  bank 154 

Advertising — As  United  States  depository  for  postal  savings  funds  374 

Savings  accounts  by  national  banks  293 

Use  of  word  "Federal"  266 

Advisoey  Council — 'Federal   238 

Agencies — Foreign,  establishment  of,  by  Federal  Reserve  Banks . . .  274 

Foreign,  of  Federal  Reserve  Bank  of  New  York 275 

Of  National  Banks  100 

Agent — In  Liquidation  (see  Liquidating  Agent)   

Of  Shareholders  (see  under  Shareholders)    

Agricultural  Paper — Agricultural  implements,  notes,  discount  or 

purchase  of  246,  247 

Chattel  mortgages 246 


549 

PAGE 

Agricultural  Paper — Definition  of 244 

Discount  of   244 

Note  of  dealer  in  live  stock 247 

Amount — Of  capital  required  33 

Annual  Meeting — Provisions  in  by-laws  on  452 

Meeting,  of  Shareholders   65 

Report  of  Comptroller 4 

Report  of  Federal  Reserve  Board 228 

Application — For  deposits  of  public  moneys  357 

To  increase  capital  stock 505 

To  reduce  capital 511 

Appointment — Of  examiners  by  Comptroller  129 

Articles  of  Association , 8 

Amendment  of,  for  extension  of  charter  50,  536 

Corporations  authorized  to  do   foreign  banking   business 

under  the  Edge  Act 307 

National  Banks,  execution  of 433 

National  Banks,  form  of  . ., 430 

National  Banks,  naming  of  directors  in  433,  434 

State  Bank,  converting  into  National  Bank  467 

Assessment — Against  shareholders 62,    63 

By  shareholders  where  capital  impaired   112 

Certificate  of  payment  of,  to  restore  capital 518 

For  expenses  of  Federal  Reserve  Board 227 

Of  tax  on  circulation 133 

Assets — Of  State  Banks  converting  into  National  46 

Assignee — Power  of  National  Bank  to  act  as  252 

Assignment" — For  creditors  by  stockholder 59 

Of  open  account,  rediscount  of,  with  Federal  Reserve  Bank  246 

Of  right  to  new  capital  stock 511 

Of  Registered  Bonds  407,  408,  410,  411 

Assumption — Of  obligations  of  another  bank  „ 15 

Attachment — 'Prohibited   before  final  judgment  against  National 

Bank    , 187 

Attorneys — Employment  of,  by  National  Banks 16 

Authority — To  commence  business 40 

B 

Bad  Debts— Definition  of  112,  113 

Bank — Guaranty  Law  19 

Banking  Hours — Provisions  in  by-laws  on  454 

Banking  House  20 

Banking  Powers— Of  national  banks 10 


550 

PAGE 

Bankruptcy — Law  not  applicable  to  national  banks 149 

Banks — (See  National  Banks,  State  Banks,  Member  Banks,  Fed- 
eral Reserve  Banks) 
Bills  of  Exchange — Acceptance  of  to  furnish  dollar  exchange, 

261,  263,  264 

Definition  of  243,  266 

Discount  of,  by  Federal  Reserve  Banks  240 

Drawn  against  actually  existing  values 106,  250,  251 

Foreign,  purchase  of,  by  Federal  Reserve  Banks 275 

Indorsement  on  268 

Negotiability  of  252,  328 

Negotiability  of,  payable  "in  exchange"  288 

Open  market  purchases  of 265,  273 

Bills  of  Lading — Security  for  acceptances  255 

Bills  of  Sale — Acceptance  secured  by 267 

Bills   receivable  as   collateral,   for   rediscount   at   Federal 

Reserve  Bank 248 

Bimetallism — International   385 

Boabd  of  Directors   68 

Body  Corporate — When  association  becomes  a  439 

Bonding — Of  Federal  Reserve  Agents  231 

Bonds — '(See    United    States    Bonds,    Coupon    Bonds,    Registered 
Bonds) 
District   of  Columbia   and   insular   possessions   of   United 

States    399 

Farm  Loan,  loans  secured  by  331 

National  Banks  dealing  in  12 

Of  Officers  of  National  Banks  17 

Revenue,  purchase  of  by  Federal  Reserve  Banks  in  open 

market    269 

Books  of  Bank — Evidence  in  suit  on  assessment  63 

Inspection  of,  by  shareholders  130,  145 

Borrowing  of  Money — By  national  banks 14 

Branches — Conversion  of  State  Banks  with  47 

Corporations  authorized  to  do  foreign  banking  business...  323 

Excessive  loans  by  national  banks  with  105 

Foreign,  of  national  banks,  establishment  of 304 

Foreign,  of  national  banks,  examination  of  306 

Of  Federal  Reserve  Banks  203,  204 

Of  Federal  Reserve  Banks,  Directors  of  203 

Of  national  banks  1°° 

State  bank  converting  into  national  bank  469 

State  bank,  transactions  and  membership 225 

Trust  company  members  225 


551 

PAGH 

Building  &  Loan  Associations — Eligibility  for  membership  226 

Building  Company — Power  of  national  bank  to  take  stock  in 21 

Bubeau  of  Comptroller  of  Currency  2 

Business  Paper  107 

By-Laws— Provisions  of  and  form 442,  452455 

C 

Called  Bonds — United  States,  forwarded  for  redemption 416 

Cancellation — Of  circulating  notes  97 

Of  Treasury  notes  and  issue  of  silver  certificates  379 

Capital — Moneyed,  definition  of  135 

Capital  Stock — Amount  of,  required  33,  425 

Application  to  increase   505,  506 

Application  to  reduce  511 

Assessment  by  shareholders   112 

Assignment  of  right  to  new  511 

Certificate  of  increase  of  508 

Certificate  of  payment  of  assessment  to  restore 518 

Certificate  of  payment  of,  State  bank  converting  into  na- 
tional bank   469 

Collection  of  taxes  on  shares  of 141 

Corporations    authorized    to    do    foreign    banking    busi- 
ness        312,  320 

Deductions  in  taxation  of 138 

Enforcing  payment  of Ill 

Exemptions  in  taxation  of 137 

Failure  to  pay  installments  on  38 

Form  to  credit  dividend  upon  subscription  for  new 509 

Impairment  of 43,  111,  515 

Increase  of 41,  435,  505 

Increase  of,  by  consolidation   495 

Increase  of,  when  valid   42 

Legal  status  of   39 

Liability  of  subscribers  to  new  stock  59 

Lien  of  bank  on,  provision  for 435 

Limit  of  time  for  payment  of  39 

Lost  certificates  of  36 

Meeting  of  shareholders  to  increase 506 

Meeting  of  shareholders  to  reduce 512 

Par  value  of  34 

Payment  for 37,  111 

Payment  for,  on  organization  442,  445 

Price  of  new 510 


552 

PAGE 

Capital  Stock — Reduction  of 43,  327,  511 

Restoration  of,  reduced  by  failure  to  pay  installments 38 

Restoration  of  impaired  515 

Right  of  shareholders  to  subscribe  to  increase 42,  509 

Rights  of  shareholders  in  reduction 514 

Sale  of,  of  delinquent  shareholders  38,  519 

State  bank  converted  to  national  bank 458,  462 

Taxation  of,  by  states  134 

Transfers  of 34,  455 

Transfers  of,  in  liquidation 145 

Valuation  of,  for  taxation 136 

When,  must  be  paid  in 37 

Withdrawal  of  112 

Of  Federal  Reserve  Banks,  decrease  of 212,  213 

Of  Federal  Reserve  Banks,  dividends  on 216,  217 

Of  Federal  Reserve  Banks,  increase  of 212,  213 

Of  Federal  Reserve  Banks,  minimum 199,  203 

Of   Federal   Reserve   Banks,    national    banks   required    to 

subscribe  to    200 

Of  Federal  Reserve  Banks,  payment  for,   by   State  bank 

member   223 

Of  Federal  Reserve  Banks,  shares 212 

Of  Federal  Reserve  Banks,  State  banks  as  members. . .  219,  223 
Of  Federal  Reserve  Banks,  subscriptions,  allotment  to  the 

United  States  200,  202 

Of  Federal   Reserve  Banks,   surrender  of,   by  liquidating 

bank    217 

Of  Federal  Reserve  Bank,  surrender  of,  State  bank  con- 
verted into  national  bank 216 

Of  Federal  Reserve  Banks,  tax  exemptions 218 

Of  Federal  Reserve  Banks,  transfer  of 202,  212,  216 

Cashier — Authority  to  make  leases 21 

False  representations  of  16 

Central  Reseeve  Cities  230 

Reserves  carried  by  member  banks  located  in 295 

Reserves  carried  by  member  banks  not  located  in 294 

Status  of,  under  Federal  Reserve  Act 203 

Central  Reserve  City  Banks — Real  estate  loans  by 25 

Certificate — Comptroller's,  in  organization,  publication  of 448 

Of  authority  to  commence  business  40 

Of  expiration  of  charter 533 

Of  increase  of  capital  508 

Of  increase  of  capital  in  consolidation 495 

Of  organization  of  Federal  Reserve  Banks  204 


553 

PAGE 

Certificate— Of  organization  of  national  bank 435-438 

Of  organization  of  State  bank  converting  into  national  . . .  467 

Of  participation  in  note,  rediscount  of 248 

Of  payment  of  assessment  on  stock  518 

Of  shareholders  vote  for  extension  of  charter 537,  539 

Of  stock,  conversion  of  State  bank  into  national 470 

Of  stock,  lost  certificates  36 

Of  stock,  temporary,  in  organizing  national  bank 425 

Certified  Checks — Illegal  certification   108,  175 

Certified  Copies — Of  Comptroller's  records  as  evidence   189 

Of  Organization  Certificate  as  evidence 190 

Change  of  Name  and  Location — Of  national  banks   49,  519 

Charter — Application  for  extension  of  536 

Expiration  of 53,  533,  536 

Extension  of  50,  535 

Forfeiture  of,  for  violation  of  law  161,  162 

In  liquidation 145 

Re-extension  of   543 

Charter  Number — To  be  printed  on  circulating  notes 84 

Chattel  Mortgages — Agricultural  paper  secured  by 246 

Check   Clearing  and   Collection — Bill   of   lading   drafts,   method 

of  collecting  283 

Collection  of  checks  by  Federal  Reserve  Banks 239 

Federal  Reserve  Banks  as  collecting  agents   for  member 

banks    283 

Gold  settlement  fund  of  Federal  Reserve  Board 288 

Negotiability    of   bills   and    notes    made    payable    in    "ex- 
change"      288 

Non-member  banks,  collection  of  items  on 287 

Par  collection,  meaning  of 287 

Regulations  of  the  Reserve  Board  on 284 

Check3 — Certification  of,   illegally    108,   175,  222 

Dealing  in  by  national  banks  16 

Circular  of  Comptroller — On  loaning  powers  of  banks 102 

On  real  estate  loans 26 

Circulating  Notes   (National  Bank  Notes) — Abatement  of  tax  on, 

of  insolvent  banks 133 

Amount  of  81,     82 

Appointment  of  receiver  for  failure  to  pay 147 

As  legal  tender 388,  486 

Banks  extending  charter  90 

Bonds  acceptable  as  security  for  deposit  of 78,  474,  475 

Bonds  for  security,  annual  examination  of 479 

Bonds  for  security,  withdrawal  of  476,  478 


554' 

PAGE 

Cibculating  Notes — Cancellation  of 97 

Change  of,  upon  extension  of  charter 540 

Charter  number  to  be  printed  on 84 

"Circulation"  accounts  475,  482 

Circulation  privilege  of  national  banks   447,  473 

Collection  of  tax  on 133 

Counterfeit  to  be  stamped  115 

Counterfeiting,  penalty  for  176,  177 

Countersigning  unlawfully   169 

Delivery  of  81 

Denomination  of  S2,  83 

Deposit  to  redeem,  by  liquidating  banks 91 

Depreciation  in  value  of  bonds  to  secure 79 

Destruction  of,  mode  98 

Destruction  of,  power  of  attorney  to  agent  to  witness 479 

Destroying  and  replacing  mutilated  86 

Disposition  of  redeemed,  by  Treasurer 97,  485 

Expense  of  protest  of  156 

Expense  of  transporting  and  assorting 96 

Failure  to  redeem  93,  94 

Five  per  cent,  fund  account  480,  483 

For  what  receivable  85 

Forgery  of,  penalty 176,  177 

Hypothecation  of,  prohibited 114 

Imitation  of,  prohibited   182 

Increase  of   74 

Increase  of  after  retirement  76,  82 

Issue  of  new 485 

Issue  of  other,  prohibited 86 

Issuing,  of  closed  banks  prohibited  180 

Ledger  accounts 482 

Less  than  one  dollar  prohibited  182 

Liability  of  bank  for  unsigned  85 

Lien  on  assets  of  bank  95 

Limitation  of   82,  85 

Liquidating  banks   91,  92,  93 

Method  of  verifying  remittances  of  mutilated  notes 484 

Mutilation  of,  prohibited  183 

New,  issue  of  485 

Order  for 447,  473 

Order  for,  on  extension  of  charter 540 

Plates  and  dies  for  printing 84,  96,  473 

Power  of  attorney  to  agent  to  witness  destruction  of 479 

Printing  of   83 


555 

PAGE 

Circulating  Notes — Protest  of 93,    95 

Receipt  of  as  security  prohibited  170 

Redemption  of   87,  481 

Redemption  of,  of  failed  bank  95 

Redemption  of,  of  liquidating  bank  92,     93 

Refunding  excess  tax  on  133 

Remittances  for  redemption  of  482,  484 

Repeal  of  limit  of   85 

Retirement  of   74,  89,     90 

Returns  of  outstanding,  for  taxation  132 

Sale  of  bonds  to  pay 95,     96 

Signatures  of  officers  forged  85 

State  taxation  of 142 

Tax  on 131,  132,  486,  490 

Tax  on,  of  State  banks 143 

To  be  received  at  par 114 

Transfer  of  bonds  held  to  secure  79,     80 

Uncurrent,  not  to  be  paid  out 114 

Withdrawal  of  bonds  securing  476,  478 

Circulation  of  State  Banks — Tax  on 143 

Cities — Federal  Reserve  (see  Federal  Reserve  Cities) 

City  Real  Estate: — Loans  on  26 

Citizenship  of  National  Banks  185 

Claims  of  United  States  Against  Insolvent  Banks 155 

Class  A,  B  and  C  Directors    (see  Directors  of  Federal  Reserve 

Banks)    

Clayton  Act  and  Keen  Amendment 333 

Clayton  Act — Enforcement  of  compliance  with  provisions  of. .   341,  342 

Exceptions  to  provisions  of 307,  313,  336 

Interlocking  directors  334 

Interpretation  of 337 

Private  bankers  334,  335 

Clearing  House — Federal  Reserve  Banks  for  member  banks 283 

Federal  Reserve  Board  for  Federal  Reserve  Banks 283 

Power  of  national  bank  to  join   17 

Clearings — (See  Check  Clearing  and  Collection)    

Clerical  Force — Federal  Reserve  Banks 206 

Coin — Gold,  dealing  in,  by  Reserve  Banks  268 

Collateral — Bills   receivable,    for   rediscount   at   Federal   Reserve 

Bank   248 

Debentures  as   22 

Discount  of  notes  by  Federal  Reserve  Banks 248 

Receipt  of  circulating  notes  as,  prohibited 170 

Security  for  Federal  Reserve  notes  252,  277 


556 

PAGE 

Collateral — Substitution  of,  for  Federal  Reserve  notes 281 

To  claims  against  insolvent  bank 155 

Collecting  Agents — Reserve  Banks  as,  for  member  banks 283 

Collection  of  Tax — On  circulation   133 

On  shares  of  stock  141 

Collections — By  national  banks 16,     19 

Exchange  charge  on  bankers'  acceptances 240 

Power  of  Federal  Reserve  Banks  to  make 239 

(See  also  Check  Clearing  and  Collection) 

Commencement  of  Business — By  national  banks 40 

Commercial  Paper — Purchase  of,  by  national  banks 14 

Commissions  to  Officers  and  Employes — Of  member  banks  pro- 
hibited      301 

Commodity  Paper — Definition  of 244 

Discount  of,  by  Reserve  Banks 244,  247 

Purchases  of,  by  Reserve  Banks  from  member  banks 247 

Compensation — '(See   Salaries)    

Compounding  Interest  Illegally   124 

Compensation — (See  Salaries) 

Advertisement  to  creditors  of  insolvent  banks  154 

Annual  report  of 4 

Application  to,  in  organizing  national  bank 426 

Appointment  of  2 

Appointment  of  Receiver  by 147,  148 

Approval  of,  for  increase  of  capital  42 

Assessment  against  shareholders  by 62 

Bond  of   2 

Bureau  of   2 

Certificate  of,  approving  consolidation  498 

Certificate  of,  authorizing  commencement  of  business 40 

Certificate  of,  extension  of  charter  51 

Certificate  of,  organization  of  national  bank 448 

Certification  to,  of  liquidation   525 

Circular  of,  on  loaning  power  of  banks 102 

Circular  of,  on  real  estate  loans 26 

Clerks  of  3 

Copies  certified  by,  as  evidence 189 

Decision  of,  conclusive  on  impairment  of  capital 112 

Deputy  Comptroller   3 

Eligibility  to  hold  office  in  member  bank 226 

Examiners  appointed  by  129 

Ex  officio  member  of  Federal  Reserve  Board 226 

Injunction  against,  where  obtainable  189 

Judicial  notice  of  acting  comptroller 190 


557 

PAGE 

Comptboixeb  of  Currency — Liquidating  agents'  reports  to 528 

Prohibition  against  interest  in  national  banks 3 

Registry  of  bond  transfers 80 

Regulations  of,  on  national  banks  as  insurance  agents 23 

Regulations  of,  on  organization  449 

Report  of,  to  Congress 4 

Reports  of  national  banks  to 125 

Salary    2,226 

Supervisory  power  over  receivers  150 

Term  of  office    2 

Condition  Reports — (See  reports) 

Consolidation  of  National  Banks  47,  491-503 

Agreement  between  directors  492 

Dissenting  shareholders,  rights  of  499 

Liquidation  for  consolidation  500 

Meeting  and  resolution  of  shareholders   496 

Procedure    492 

With  State  banks  491 

Continuance  of  Liabilities — Under  change  of  name 49 

Contracts — Ultra  vires,  of  national  banks 18 

Contributions — Political  prohibited  181 

Conversion — Of  Liberty  Bonds  or  Victory  Bonds 415 

Conversion  of  State  Banks  into  National  Banks  45,  461-470 

Conversion  of  State  Banks — Surrender  of  stock  in  Reserve  Bank.  216 

Conversion  of  State  Banks  with  Branches  47,  469 

Copies  Certified  by  Comptroller  as  Evidence 189 

Corporate  Existence — Extension  of  50,  535 

In  liquidation    145 

Corporate  Relations  of  Converting  Banks  46 

Corporate  Powers  of  National  Banks  9 

Corporations  Authorized  to  do  Foreign  Banking  Business   (Edge 

Act)    307 

Acceptances   324 

Articles  of  association 308,  318 

Branches    323 

Capital  stock  312,  320 

Deposits   325 

General  limitations  and  restrictions  325 

Investment  in  the  stock  of  other  corporations  322 

Issue  of  debentures,  bonds,  and  promissory  notes 323 

Meeting  of  stockholders  314 

Operations  in  the  United  States 322 

Organization   308,  318 


558 

PAGE 

Corporations    Authorized    to    do    Foreign    Banking    Business — 

Powers  of  309 

Regulations  of  the  Federal  Reserve  Board  governing 318 

Reports  and  examinations  of 315,  32G 

Sale  of  foreign  securities  323 

Title    319 

Corporations  in  which  National  Banks  Own  Stock — Powers  of 

Federal  Reserve  Bank  over 306 

Corporations  transacting  foreign  business,  power  of  national  banks 

to  take  stock  in   305 

Corporators  of  National  Banks   421,  422 

Counterfeit  Notes  or  Coins  395 

Counterfeiting  national  bank  notes,  penalty 176,  177 

Counterfeits — Passing,  selling,  etc.,  prohibited 179,  180 

Stamping  of   115 

Countersigning  circulating  notes  unlawfully  169 

Coupon  Bonds — Coupons  detached  from  called  bonds 417 

Exchange  of,  for  bonds  of  other  denominations 401 

Exchange  of,  for  registered  bonds 76 

Lost,  stolen  or  destroyed 414 

Courts — Jurisdiction  of  Federal  in  Receivership  cases 152 

Power  of,  to  appoint  Receiver 149 

Credit  Companies — Notes  of,  discount  of 247 

Creditors — Notice  to,  of  liquidation  526 

Creditors  of  Insolvent  Bank — Advertisement  to,  by  Comptroller..  154 

Claims  of,  how  established  154,  156 

Dividends  to'  154,  156 

Interest  on  claims  of 155 

Secured  creditors 155 

Cumulative  Voting   55 

Currency  and  Money — Address  on  packages  sent  to  Washington . .  393 
Cancellation  of  Treasury  notes   and   issue   of   silver   cer- 
tificates       379 

Division  of  Issue  and  Redemption,  establishment  of 379 

Exportation  of  silver  coin  or  bullion  385 

Federal  Reserve  Bank  notes,  issuance  of 384 

Federal  Reserve  Bank  notes,  retirement  of 384 

General  information 394 

Gold  certificates,  issue  of 380 

Gold  dollar  as  standard  unit  of  value 377 

Issue  of  gold  coin  389 

Issue   of   standard   silver   dollars,   subsidiary   silver    coin 

and  minor  coin   390 

Issue  of  United  States  paper  currency 398 


559 

PAGE 

Cubbency  and  Money — Legal  tender — Federal  Reserve  notes 388 

Legal  tender — Foreign  coins  386 

Legal  tender — Gold  certificates 388,  389 

Legal  tender — Gold  coin  387 

Legal  tender — Interest  bearing  notes  388 

Legal  tender — Minor  coins  387 

Legal  tender — National  bank  notes  388 

Legal  tender — Silver  certificates 388 

Legal  tender — Silver  coins,  subsidiary 387 

Legal  tender — Silver  dollars  387 

Legal  tender — Treasury  demand  notes 387 

Legal  tender — United  States  notes 387 

Maintenance  of  gold  reserve,  sale  of  bonds  to  replenish . . .  377 

Melting  of  silver  dollars  and  sale  of  bullion 382 

Notes,  shipment  of  unfit  to  Washington 393 

Regulations   governing  the   issue,   exchange  and   redemp- 
tion of    389 

Reimbursement  for  loss  in  melting  silver  dollars 383 

Shipments  of  moneys  from  Washington 394 

Silver  bullion,  sales  of  383 

Silver  ore,  purchase  of  382 

Subsidiary  silver  coinage  381,  382 

Treasury  notes,  issue  of 386 

D 

Date  of  Liquidation  147 

Debentures — Power  of  national  banks  to  take  as  collateral 22 

Debts — Bad,  definition  of  112,  113 

Compounding,  by  receiver  151 

Deceased  Shabeholders — Liability  of  58 

Decrease  of  Capital  Stock  of  Federal  Reserve  Banks 212 

Deductions  in  taxation  of  shares  of  stock  138 

Definitions — Agricultural  paper  244 

Bad  debts    112,  113 

Bankers'  acceptances  245 

Bills  of  exchange  243,  266 

Commodity  paper   244 

Drafts   243 

Promissory  notes    243 

Terms  of  Federal  Reserve  Act  198 

Trade  acceptances 243 

Delinquent  Shareholders — Sale  of  stock  of  519 

Demand  and  Sight  Bills — Due  date  of,  as  acceptances 259 


560 

PAGH 

Demand  Deposits — Definition  of  292 

Demand  Notes — Discount  of  248 

Denomination  of1  Cibculating  Notes  82,     83 

Depositories — Government,  classes  of 276,  350 

Disbursing  officers,  duty  of 345 

Federal  Land  Banks  as 349 

Penalty    for     unauthorized     receipt     or     use    of    public 

money   181,  360 

Penalty  for  unauthorized  deposit  of  public  money 360 

Proceeds  of  sales  of  Liberty  Bonds 348 

Provisions  for  deposit  by  certain  postmasters 346 

Public  moneys,  deposit  of   44,  350 

Regular  government  depositories  350-353 

Reserve   requirements   not   applicable   to   government   de- 
posits       348 

Special  government  depositories 354-357 

Deposits — By  receivers  of  national  banks   150 

Demand,  definition  of  292 

Gold   coin   and   certificates    deposited    with    Treasurer   by 

Reserve  Banks  288 

Government — In  Federal  Reserve  Banks 275 

Postal  funds  in  nonmember  banks  276 

Reserves  against  297 

Limit  of,  member  with  nonmember  bank 296 

Member  bank's,  in  Reserve  Banks 239 

Nonmember  bank's,  in  Reserve  Bank 240 

Of  bonds  to  secure  circulation  474,  475 

Of  bonds  with  Treasurer  74 

Powers  of  national  banks  to  receive 11 

Savings 11,  294 

Special    11 

Tax  on  142 

Time  292-294 

Time,  reserve  against   294 

Unfit  currency  with  Reserve  Bank  240 

When  bank  insolvent 166 

Deputy  Comptroller  of  the  Currency  3 

Deputy  Federal  Reserve  Agent  210 

Destruction  of  mutilated  circulating  notes,  power  of  attorney  to 

agent  to  witness  479 

Destroying  mutilated  circulating  notes  86,     98 

Directors — Agreement  between  for  consolidation  492 

Board  of  68 

Disqualification  of  69 


561 

PAGE 

Directors — Duty  of,  to  preserve  assets  when  examiner  in  charge..  153 

Election  of,  by  shareholders 54,  65,  434 

Fees,  commissions,  gifts,  etc.,  to,  forbidden 301 

Interlocking,  prohibited   333 

Liability  of,  for  excessive  loans,  false  reports,  etc 164 

Liability  of,  for  neglect   165 

Liability  of,  for  violations  of  law  161 

Meetings  of   454 

Naming  of,  in  articles  of  association 433,  434 

No  election  at  time  appointed  69 

Number  of 435 

Oath  of  67,  440 

Qualifications  of  66,  434 

Resignation  of  69 

State  banks  converting  into  national  46,  470 

Suits  against   153 

Suits  against  by  shareholders'  agent  161 

Suits  against  for  violation  of  law 163,  164 

Suits  against,  in  liquidation  146 

Term  of  office 65 

Usurious  loans  permitted  by  124 

Vacancies,  how  filled  69 

Of  branches,  of  Federal  Reserve  Banks  203 

Of  Federal  Reserve  Banks,  Chairman,  appointment  of 210 

Of  Federal  Reserve  Banks,  Class  A  and  Class  B,  election  of  208 

Of  Federal  Reserve  Banks,  Class  C,  appointment  of 210 

Of  Federal  Reserve  Banks,  Classification  of  207 

Of  Federal  Reserve  Banks,  Deputy  Chairman,  appointment 

of   210 

Of  Federal  Reserve  Banks,  duties  of  206 

Of  Federal  Reserve  Banks,  national  bank  examiners  as...  208 

Of  Federal  Reserve  Banks,  nomination  of , 209 

Of  Federal  Reserve  Banks,  qualifications  of 207,  211 

Of  Federal  Reserve  Bank,  removal  of 231 

Of  Federal  Reserve  Banks,  residence,  change  in 207,  211 

Of  Federal  Reserve  Banks,  term  of  office 207,  211 

Discount  Committee — Provisions  in  by-laws  on 454 

Discounts — Acceptances    252 

Bills  of  exchange   240 

Bills  receivable  as  collateral  248 

Collateral  notes  248 

Credit  companies,  notes  of 247 

Demand  notes   248 

Drafts    240 

36 


562 

PAGE 

Discounts — Drafts  payable  on  or  before  certain  date 248 

Excess  of  limitation  when  secured  by  war  obligations 237 

Excess  of  10  per  cent 250,  251 

Finance  companies,  notes  of 247 

Indorsements  on  separate  piece  of  paper 249 

Limitation  on,  by  Federal  Reserve  Banks. . .  .248,  249,  250,  251 

Limitations,  one  maker  or  indorser  250 

Notes    240 

Notes  payable  on  or  before  a  certain  date 248 

Paper  secured  by  bonds  or  notes  of  the  United  States 249 

Rates   249,  274 

Rates,  establishment  of,  by  Federal  Reserve  Banks 274 

Rates,  forward  discount  rates  274 

Rates,  preferential,  on  member  banks'  notes 274 

Readily  marketable  staples,  definition  of 249 

Trade  acceptances  providing  for  discount  if  paid  at  ma- 
turity       249 

Disqualification  of  Directors   69 

Dissenting  Shareholders — Rights  of  in  consolidation 499 

In  extension  of  charter 542 

District  Attorney — Conduct  of  suits  by  189 

To  represent  national  bank's  receivers  153 

District  Court — Original  jurisdiction  of  187 

Districts — Federal  Reserve  192,  199 

Diverse  Citizenship  185 

Dividends — Authority  to  credit  upon  subscription  for  new  stock. .  509 

Declaration  of  113 

In  liquidation  14G,  532 

Notification  of  special   127 

Of  Federal  Reserve  Bank  stock 216,  217 

Prohibition  against,  when  capital  impaired 112 

Recovery  of  illegal  113 

Refusal  to  declare  113 

Reports  of  127 

To  creditors  of  insolvent  bank 154,  156 

Division  of  Issue  and  Redemption — Establishment  of 379 

Dollar  Exchange — Acceptances  to  furnish 261,  263,  264 

Donations — By  national  banks   17 

Double  Liability  of  Shareholders 56,     57 

Drafts— Defintion   of    243 

Discount  of,  by  Federal  Reserve  Bank 240 

Drawn  on  sales  corporation,  as  acceptances 246 

Payable  on  condition,  rediscount  of,  with  Reserve  Bank. . .   245 


563 

PAGE 

Drafts — Payable  on  or  before  certain  date,  discount  of,  by  Reserve 

Bank   248 

Purchase  of,  at  usurious  rate  117 

Duties  of  Examiners   129 

E 

Earnings — Net,  reports  of  127 

Earnings  of  Federal  Reserve  Banks  paid  into  surplus  fund 216 

Edge  Act — (Corporations  authorized  to  do  a  foreign  banking  busi- 
ness)        307 

Election — Class  A  and  B  directors  of  Federal  Reserve  Banks 208 

Directors  of  national  banks 54,  65,  433,  434 

Of  directors  not  held  at  time  appointed  69 

Embezzlement  of  bank's  funds 170 

Emergency  Currency   327 

Entries — False    170 

Equity — Receiver  may  purchase  real  estate  to  protect 157 

Estoppel  against  shareholders  61 

Evidence — Certified  copies  as  189 

Certified  copy  of  Organization  Certificate  as  190 

Examination — Corporations  under  Edge  Act 315,  326 

Expenses  of,  of  national  banks  156,  330 

Federal  Reserve  Banks  301 

Foreign  branches  of  national  banks  306 

Member  banks   300 

Of  books  by  shareholders  130,  145 

Of  United  States  bonds  by  bank's  agent 81 

Preliminary,  of  organizing  banks  40,  429 

Provisions  in  by-laws  on,  by  directors  455 

Special,  of  extended  bank  51 

State  bank  converting  to  national  458,  464 

State  bank  members  219,  224 

Trust  department  of  national  bank  236 

Examiners — Appointment  of 129,  300 

As  directors  of  Federal  Reserve  Bank  208 

Duties  of   129 

In  charge  of  bank 153 

Loans  to,  prohibited 301 

Powers  of    129 

Salaries  of  129,  300 

Service  for  compensation  to  any  bank  or  officer  prohibited .   302 

Excess  Loans  102 

Liability  of  directors  for  164 


564 

PAGE 

Excess   Loans — Permission  to  discount  excessive  paper  when  se- 
cured "by  war  obligations  237 

State  bank  members   224 

Excess  of  10  per  cent.,  acceptances  in 254,  255,  258 

Exchange  and  transfer  of  Liberty  bonds 399 

Exchange  Charges — 'Banker's  acceptance  240 

Exchange  of  Bonds 76,     79 

Execution  Prohibited  Before  Final  Judgment  187 

Executors — As  shareholders  64,  437 

Power  of  national  bank  to  act  as 232 

Exemptions  in  taxation  of  shares  of  stock 137 

Expenses — Of  examination  and  receivership  156 

Of  Federal  Reserve  Board,  assessment  for 227 

Expiration  of  Charter  53,  533 

Exportation  of  silver  coin  o'r  bullion  385 

Extension  of  Charter  50,  535 

Circulating  notes  after  90 

Reorganization  instead  of 544 

Shareholders  dissenting  to   542 

F 

False  Entries  170 

False  Reports — Liability  of  directors  for  making 164 

Farm  Land — Loans  on  by  national  banks  23,  330 

Farm  Loan  Bonds — Loans  secured  by 331 

"Federal"— Use  of  word  183,  226 

Federal  Advisory  Council  238,  239 

Federal  Courts — Jurisdiction,   in  suits  by  and   against  national 

banks   185,  187 

Jurisdiction  in  Receivership  Cases  152 

Federal  Land  Banks — As  Government  depositaries 349 

Federal  Question  168,  185 

Federal  Reserve  Act — Definition  of  terms  198 

Penalty  for  failure  of  national  bank  to  accept  terms  of . . .   201 

Federal  Reserve  Agents   210 

Bonding  of  231 

Liability  for  Federal  Reserve  notes 281 

Federal  Reserve  Bank  Notes — Description  of 277 

Issuance  and  retirement  of  384 

Similarity  to  national  bank  notes 290 

Federal  Reserve  Banks — Abolition  of  199 

Agencies,  foreign,  establishment  of 274 

As  collecting  agents  for  member  banks 283 


565 

PAGE 

Federal  Reserve  Banks — Branches  of 203,  201 

Branches  of,  acceptances  purchased  by  268 

Capital  stock  of  (see  Capital  Stock)   199 

Certificate  of  organization   204 

Cities  designated  for  location  of  199 

Clearing-house  for  member  banks  283 

Collecting  agents   239 

Corporate  powers  of 205 

Directors  of  (see  Directors  of  Federal  Reserve  Banks) 208 

Directors  of  branches  of   203 

Discount  of  notes,  drafts,  and  bills  of  exchange  by 240 

Dividends  on  capital  stock  of  216,  217 

Earnings  of,  paid  into  surplus  fund  216 

Examination  of   301 

Examiners,  appointment  df  300 

Fiscal  agents  of  the  Government 276 

Franchise  tax,  earnings  paid  as 216 

Liability  of  shareholders  of  200 

Liquidation  of   231 

Location  of,  power  to  change  199 

Member  banks,  loans  to,  by 259,  260 

Money  order  business  by  206 

Officer  of,  removal  of 231 

Officers  and  clerks  of,  tenure  of  office 206 

Open  market  operations  in  gold  coin  and  bullion 268 

Open  market   purchases   of  acceptances   and   bills   of   ex- 
change     265 

Open  market  purchases  of  notes,  bonds,  and  warrants 269 

Organization  of  198,  203,  204 

Publication  of  weekly  condition  statements  of  229 

Reorganization  of  231 

Rediscounts  by,  of  paper  of  other  Reserve  Banks 229 

Sale  of  United  States  Bonds  to  74 

Supervision  over,  by  Reserve  Board 232 

Surplus  fund,  earnings  paid  into 216 

Tax  exemptions  of   218 

Title  of,  name  of  city  in  which  lo'cated  200 

Worthless  assets,  writing  off 231 

Federal  Reserve  Board — Annual  report  of  228 

Clearing-house  for  Federal  Reserve  Banks 283 

Comptroller  of  the  Currency,  ex  officio  member 226 

Creation  of  226 

Enforcement  of  Clayton  Act  as  applicable  to  banks 341 

Expenses  of    227 


566 

PAGE 

Federal  Reserve  Bo^rd — Gold  settlement  fund  of 288 

Governor  of  227 

Members  of 226,  227 

Organization  of  226 

Powers  of,  bonding  of  Federal  Reserve  Agents 231 

Powers  of,  dealings  of  Reserve  Banks  in  negotiable  paper.  260 
Powers  of,  issue,  delivery  and  retirement  of  Federal  Re- 
serve notes   230 

Powers   of,   over    corporations    authorized    to    do    foreign 

banking  business    309 

Powers  of,  over  corporations  in  which  national  banks  own 

stock   306 

Powers  of,  rediscount  by  Reserve  Bank  of  discounted  paper 

of  other  Reserve  Banks   229 

Powers  of,  Reserve  and  Central  Reserve  cities 230 

Powers   of,   suspension,    liquidation    or    reorganization   of 

Reserve  Bank  231 

Powers  of,  suspension  of  reserve  requirements  229 

Powers   of,   suspension   or   removal   of   officer   or   director 

of  Reserve  Bank  231 

Powers  of,  supervision  over  Federal  Reserve  Banks 232 

Powers  of,  Trustee  powers  to  national  banks 232 

Powers  of,  visito'rial 229 

Powers  of,  worthless  assets,  writing  off  231 

Quarters  of  227 

Regulations  of  (see  Regulations)    

Secretary  of  the  Treasury  ex  officio  member  of 226 

Secretary  of  Treasury,  supervision  over 228 

Vacancies,  how  filled   228 

Weekly  statement  published  by  22.5 

Federal  Reserve  Cities — Designation  o'f 199 

Map  showing  location  of 192 

Federal  Reserve  Districts — Map  outlining   192 

Reduction  of 199 

Federal  Reserve  Notes — Collateral  security  for 252 

Cost  of   227 

Delivery  of  230 

Deposit  of,  for  credit  or  redemption 279 

Deposit  of  silver  certificates  to  reduce  281 

Description  of    277 

Exchange  of,  for  gold,  gold  certificates,  or  lawful  money . .  281 

Interest  charges  on   280 

Issue  of  230,  278 

Legal  tender 388 


567 

PAGE 

Federal  Reserve  Notes — Liability  of  Federal  Reserve  Agent  for..   281 

Lien  on  assets  of  Federal  Reserve  Bank  279 

Printing  of   282 

Redemption  of  278 

Reduction  of  outstanding 280 

Reserve  against  278 

Retirement  of  230,  281 

Substitution  of  collateral  for  281 

Security  for   277 

Security  for,  notes  and  bills  drawn  for  trading  in  Govern- 
ment obligations  278 

Transportation  charges  on 279 

Fees,  commissions,  etc.,  to  officers  and  employees  of  member  banks 

prohibited    301 

Fiduciary  po\vers  granted  to  national  banks 232 

Finance  or  credit  companies,  discount  of  notes  of 247 

Fiscal  Agents  of  the  Government,  Federal  Reserve  Banks  as 276 

Five  Per  Cent.  Fund  Account 480,  483 

Five  Per  Cent.  Redemption  Fund — Not  counted  as  reserve 300 

Foreign  Agencies — Establishment  of  by  Federal  Reserve  Banks...   274 

Foreign  Agents — Of  Federal  Reserve  Bank  of  New  York 275 

Foreign  Branches  of  National  Banks 304-307 

Foreign  Coins  Not  Legal  Tender 387 

Forfeiture  of  Charter  for  Violation  of  Law 161,  162 

Forfeiture  of  Franchise,  Appointment  of  Receiver 148 

Forfeiture  of  Interest  for  Usury   119 

Forgery  of  National  Bank  Notes,  Penalty 176,  177 

Form  of  Action  to  Enforce  Shareholders'  Liability 62 

Forms — Affidavit  of  publication  of  notice  of  liquidation  526 

Agreement  for  consolidation  492 

Amendment  of  articles  upon  extension  of  charter 536 

Application  to  convert  a  State  bank  into  a  national  bank.  463 

Application  to  increase  capital  stock 506 

Application  to  organize  a  national  bank 427 

Articles  of  association,  national  banks  431 

Articles   of   association,    State   bank   converting   into    na- 
tional bank  467 

Assignment  of  right  to  new  stock 511 

Authority  fo'r  conversion  of  State  bank  466 

Authority  to  credit  dividend   upon   subscription   for  new 

stock    509 

By-laws  of  national  banks  452 

Capital  stock,  payment  of  444,  445 

Certificate  of  expiration  of  charter 533 


5G8 

PAGE 

Forms — Certificate  of  payment  of  assessment  518 

Certificate  of  payment  of  capital  in  consolidation 495 

Certificate  of  payment  of  capital,   State  bank  converting 

into  national  bank  469 

Certificates   of   stock,   temporary,   in   organizing    national 

bank  426 

Certificate  of  vote  for  extension  of  charter 537 

Notice  of  expiration  of  charter 534 

Notice  of  special  shareholders'  meeting 507,  513 

Notice  to  creditors  of  liquidation  526 

Notice  to  shareholders  of  impaired  capital 516 

Notification  of  special  dividend  127 

Oath  of  director  of  national  bank 440 

Order  for  circulation  on  extension  of  charter 540 

Order  for  plates  and  circulating  notes 473 

Organization  certificate,  national  bank  436 

Organization   certificate,   State   bank   converting   into   na- 
tional      467 

Power  of  attorney  in  organization  of  national  bank 423 

Power  of  attorney  to  agent  to  examine  bonds 479 

Power  of  attorney  to  agent  to  witness  destruction  of  muti- 
lated circulating  notes 479 

Proxy  in  extending  charter  538 

Public  moneys,  application  for  deposits   357 

Public  moneys,  certificate  of  advice  358 

I                 Public  moneys,  resolution  authorizing  application  for  de- 
posits       357 

Re-extension  of  charter   543 

Reports  of  liquidating  agent  529 

Reserves,  computation  of  298 

Resolution    assuming    liabilities    of    bank    liquidated    for 

consolidation    502 

Resolution  for  assignment  of  U.  S.  bonds 406,  407 

Resolution  for  change  of  name  520 

Resolution  for  increase  of  capital  507 

Resolution  for  liquidation 523,  524 

Resolution  ratifying  consolidation   497 

Resolution  to  reduce  capital  514 

Resolution  to  restore  impaired  capital  517 

Signatures  of  officials  of  national  banks  442 

Subscription  paper  for  organizing  national  bank   424 

Subscription  to  new  stock  510 

Tax  on  circulation  486 

"Withdrawal  of  bonds  to  secure  circulation  476 


569 

PAGE 

Franchise — Forfeiture  of 141,  161,  162 

Tax,  earnings  of  Federal  Reserve  Banks  as 216 

G 

Gifts  to  Officers  and  Employees  of  Member  Banks  prohibited 301 

Gold — Against  Federal  Reserve  notes  in  circulation 278 

Dealing  in  coin  and  bullion  by  Federal  Reserve  Banks...  268 

Deposit  of,  with  Treasurer,  by  Federal  Reserve  Banks 288 

Exchange  of,  for  Federal  Reserve  notes 281 

In  gold  settlement  fund  as  reserve 288 

Shipments  of,  to  Treasurer,  expenses  of 289 

Gold  Certificates — Issue  of  380 

Legal  tender   388,  389 

Gold  Coin — Issue  of 389 

Legal  tender  387,  486 

Gold  Dollar  as  Standard  Unit  of  Value 377 

Gold  Settlement  Fund  of  Federal  Reserve  Board 288 

Government  Bonds — National  banks  dealing  in  12 

Government  Depositories — (See  Depositories,  Government) 
Government  Deposits — (See  Deposits) 

Governor  of  the  Federal  Reserve  Board  227 

Guaranty  by  National  Bank   15 

Guaranty  Laws  of  various  States 19 

Guaranty  of  Paper  sold  by  National  Banks 15 

Guardians — As  Shareholders  64,  437 

Power  of  national  banks  to  act  as  232 

H 
Hypothecation  of  Circulating  Notes  prohibited 114 

I 

Illegal  Taxation — Remedy  for  142 

Impaired  Capital — Restoration  of 515 

Impairment  of  Capital  Stock  43,  111 

Imitation  of  Circulating  Notes  prohibited  182 

Increase  of  Capital  Stock  41,  505 

Increase  of  Capital  Stock  in  Consolidation  495 

Increase  of  Capital  Stock  of  Federal  Reserve  Bank 212 

Increase  of  Circulating  Notes  74 

Indebtedness  of  National  Banks,  Limit  on 107 

Indictment  fob  Embezzlement,  Abstraction,  Misapplication,  form 

Of 174,  175 


570 

PAGE 

Indictment  for  Making  False  Entries  175 

Individual  Liability  of  Shareholders  56,    57 

Individuals — Loans  to,  by  Federal  Reserve  Banks 248 

Indobsement  "without  recourse"  247 

Indobsement — On  interest  checks  418 

On  separate  piece  of  paper 249 

Infants — As  Corporators  o'f  National  Banks   422 

As  shareholders  61 

Purchase  of  stock  in  name  of 61 

Injunction — Against  appointment  of  Receiver 156 

Against  Comptroller  where  obtainable 189 

Prohibited  before  final  judgment   187 

Insolvency — Meaning  of 166 

Insolvent  Banks — Abatement  of  tax  on  notes  of 133 

Appointment  of  Receiver  148 

Bankruptcy  law  not  applicable  to  149 

Creditors  of,  claims,  dividends,  etc 154,  155 

Deposits  made  when  bank  insolvent 166 

Disposition  of  assets  after  payment  to  creditors 158 

Meaning  of  insolvency   168 

Preferences  against  165,  166 

Set-offs  against  187 

Surrender  of  Federal  Reserve  Bank  stock  held  by 213 

Taxation  of   140 

Transfers  in  contemplation  of  insolvency 165 

Inspection  of  Books  by  Shareholders  130,  145 

Instbuments  Certified  by  Comptroller  as  Evidence 189 

Insubance  Agents — National  Banks  as  28,  330 

Insubance  on  Lives  of  Officers  18 

Interest — Compounding  of  illegally 124 

Forfeiture  of  for  usury  119 

On  bonds  held  as  security  for  circulation  78 

On  Federal  Reserve  Notes  280 

On  registered  bo'nds  417 

Rate  of,  chargeable  by  National  Banks  115,  116 

Rates    249 

To  creditors  of  insolvent  banks  155 

Usurious  charges  by  national  banks 330 

Ixtebest  Checks — Issue  of  duplicate   419 

Indorsements  on   418 

Non-receipt  or  loss  of  413 

Inteblocking  Dibectobs — (See  also  Clayton  Act)    334 

Issue  of  Cibculating  Notes  81 

Issue  of  2%  Bonds  77 


571 

PAGE 

Issue  of  Unauthorized  Notes  prohibited  86 

International  Bimetallism   385 

J 

Judgment  Notes,  Power  of  National  Banks  to  Lend  on 22 

Judicial  Notice  of  Acting  Comptroller 190 

Jurisdiction — District  Court's  original   187 

In  receivership  cases  152 

Of  Courts  to  appoint  receiver  149 

Of  State  Courts  in  usury  cases  against  National  Banks...  123 

Suits  by  and  against  National  Banks 184 

Suits  by  and  against  receivers  186 

K 

Kern   Amendment  to   Clayton   Act — Substantial   competition   be- 
tween banks   339 

Exceptions  to  act   338 

L 

Lawful  Money  92,  486 

Against  Federal  Reserve  notes  in  circulation 278 

Exchange  of,  for  Federal  Reserve  notes 281 

Leases,  Power  of  Cashier  to  Make 21 

Ledger  Accounts  Covering  Circulation  482 

Legal  Status  of  Capital  Stock  39 

Legal  Tender — (See  also  Currency  and  Money)    486 

Lending  Money  for  Customers  16 

Liabilities — Banks  extending  charter 51 

Continuation  of,  under  changed  name  of  bank 49 

Directors,  for  excessive  loans,  false  reports  164 

For  neglect  165 

For  violations  of  law  161 

For  illegal  certification  of  check  109 

Of  executors,  trustees,  etc.,  as  shareholders 64 

Of  Federal  Reserve  agents  for  Federal  Reserve  notes 281 

Of  shareholders  of  Federal  Reserve  Banks 200 

Of  shareholders  of  national  banks  56,  57,  304 

Of  shareholders  of  national  banks  in  liquidation 147 

Of  shareholders  of  State  member  banks  225 

Total,  of  any  person  to  national  bank 101 

Liability  of  National  Banks — False  representations  of  cashier...  16 


572 

PAGE 

Liability  of  National  Banks — Ultra  vires  purchase  of  stock 13 

Liability  of  Pledge  of  Stock  60 

Liberty  Bonds   397 

Conversions  of  415 

Exchange  and  transfer  of 399 

Rules  and  regulations  concerning  transactions  in 399 

License  Tax  141 

Lien — By  national  bank  on  own  stock 109 

Federal  Reserve  notes  as,  on  assets  279 

Provisions  for,  on  capital  stock  435 

Limit  of  Liability  of  any  Person  to  National  Bank 101 

Limit  on  Total  Indebtedness  of  National  Banks  107 

Limitations — Acceptances 254,  255 

Bills  of  exchange  drawn  against  actually  existing  values, 

250,  251 

Member  banks'  acceptances  252 

Rediscounts   248,  249,  250,  251 

Of  circulating  notes  82,     85 

Of  visitorial  powers 130 

On  real  estate  holdings  of  national  banks  20 

On  real  estate  loans  to  one  person  25 

Limitations  Under  Section  13 — Rediscount  of  paper  of  one  bor- 
rower for  different  member  banks  251 

Rediscounts,  one  maker  or  indorser 250 

Liquidated   Bank — Dividends   accrued   on   Federal   Reserve   Bank 

stock    217 

Liquidating  Agent — Appointment  and  powers  of 527 

Reports  of,  to  Comptroller  528,  529 

Liquidating  Committee — (See  Liquidating  Agent)   

Liquidation — Appointment   of    receiver   after    (voluntary    liquida- 
tion)      146 

By  expiration  of  charter 523 

Corporate  existence  in  145 

Date  of 147 

Dividends  to  shareholders  146 

Election  and  powers  of  officers  532 

Expiration  of  charter 53 

Federal  Reserve  Bank 231 

For  consolidation 500,  501 

General  instructions  on   522 

Inspection  of  books   145 

Liability  of  shareholders  64,  147 

New  contracts   145 

Notice  of  intention  to  go  into 146 


573 

PAC3E 

Liquidation — Redemption  of  circulation  91,  92,    93 

Shareholders'  meeting 145 

Suits  against  directors   146 

Surrender  of  Federal  Reserve  Bank  Stock 213,  215,  216 

To  sell  business  or  to  reorganize  532 

Transfers  of  stock   145 

Withdrawals  of  U.  S.  Bonds  526 

List  of  Shareholders  to  be  Furnished 115 

Loaning  Powers  of  National  Banks  101 

Loans — By  national  banks  on  own  stock  109 

Excess  by  national  banks  102 

Excess,  by  State  bank  members  224 

Excess,  liability  of  directors  for 164 

Funds  in  trust  department  of  national  bank 233 

On  city  real  estate  26 

On  improved  farm  lands  330 

Real  estate,  by  foreign  branches  of  national  banks 305 

Real  estate  by  national  banks 23,  304 

Secured  by  farm  loan  bonds  331 

Security  for,  by  national  banks  12 

Stock  of  other  national  banks Ill 

To  individuals,  by  Federal  Reserve  Banks  248 

To  officers   16 

Usurious,  by  national  banks  118 

Loans  on  Real  Estate 23,  304 

Circular  of  Comptroller  of  Currency 26 

Limit  of,  to  one  person 25 

National  banks  as  agents  in  making 28 

Location — Change  of 49,  519 

Location  of  Federal  Reserve  Bank,  change  of 199 

Lost  Certificates  of  Capital  Stock  36 


M 


Map  Outlining  Federal  Reserve  Districts  192 

Married  Women,  as  Corporators  of  National  Banks 422 

Liability  of  as  shareholders 58 

Meetings  of  Shareholders 54,     65 

For  liquidation  145 

Increase  capital  stock  506 

Notice  of  special  meeting 507,  513 

Proxy  for  special  meeting 508,  513 

Ratification  of  consolidation  496 

Reduction  of  capital  stock 512 


574 

PAQH 

Member  Banks — Acceptances  253,  256,  258,  261 

Advances  to,  by  Federal  Reserve  Banks 259,  260 

As  agents  for  non-member  banks  in  rediscounting 296 

Building  and  loan  associations  as  226 

Capital  stock  in  Federal  Reserve  Bank 212 

Deposits  of,  with  non-member  bank,  limit  of 296 

Examination  of  300 

Fees,  commissions,  etc.,  to  officers  and  employees  of,  pro- 
hibited       301 

Loans  to,  by  Federal  Reserve  Banks   259 

Mutual  Savings  Banks  as  225 

Private  bankers  as  225 

Reserves  carried  by 294,  295 

State  banks,  applications  to  become 218,  223 

Branches    225 

Capital  stock  223 

Condition   reports    219,   224 

Eligibility    222 

Examinations   219,  224 

Excess  loans   224 

Liability  of  stockholders  of  225 

Regulations  of  Federal  Reserve  Board  on 222 

Restrictions   on    219 

Status  under  Clayton  Act  334,  337 

Withdrawal  from  Membership   220 

Transfer  of,   from  one  district  to   another,   dividends   on 

Federal  Reserve  Bank  stock  217 

Voluntary  liquidation,  surrender  of  Federal  Reserve  Bank 

stock   213,  215,  216 

Membership — Banks  located  outside  of  Continental  United  States. .  300 

Minor  Coins  as  Legal  Tender  387 

Minors — Assignments  of  Registered  Bonds  of 411 

Minute  Book — Provisions  in  by-laws  on 454 

Misapplication  of  Bank's  Funds  170 

Money — (See  Currency  and  Money)   

Money  Order  Business  by  Federal  Reserve  Banks  206 

Moneyed  Capital — Meaning  of 135 

Municipal  Bonds — Purchase  of,  by  national  bank 13 

Mutilated  Circulating  Notes — Remittances  of 484 

Agent  to  witness  destruction  of 479 

Redemption  of  481,  484 

Mutilation  of  Circulating  Notes  Prohibited 183 

Mutual  Savings  Bank — Eligibility  for  membership 225 

Not  under  prohibitions  of  Clayton  Act 337 


N 

PAGE 

Name — Change  of 49,  519 

Of  national  bank  428 

"National"  unauthorized  use  of,  prohibited  183 

National  Bank  Act — Penalty  for  violations  of  161 

National  Bank  Notes — (See  also  Circulating  Notes)    

As  legal  tender 388,  486 

Similarity  to  Federal  Reserve  Bank  notes  290 

National  Banks — Liability  of   (see  Liability  of  National  Banks) 

Powers  of  (see  Powers  of  National  Banks)   

Advertising  of  savings  accounts  by 293 

Agencies  of  100 

Articles  of  Association 8,  430,  435 

As  insurance  and  real  estate  agents  330 

By-laws 442,  451 

Branches  of  100 

Branches  of  State  banks  converting  47 

Change  of  name  and  location  49,  519 

Circulating  notes  of 81,  447 

Citizenship  of 185 

Commencement  of  business  by 40,  448 

Consolidation  of  47,  491 

Conversion  of  State  banks  into 45,  216,  461,  471 

Conversion  of  State  banks  with  branches 47 

Corporate  powers  of 9 

Directors  of  433 

Excessive  loans  by  102 

Excessive  loans  by  with  branches  105 

Filing  of  organization  papers  439 

Foreign  branches  of 304 

Indebtedness  of,  limit  on 107 

Interest  chargeable  by  115,  116 

Interlocking  directorates  under  Clayton  Act 335,  336 

Liability  of  stockholders   304 

License  tax  not  collectible  against  141 

Limit  of  liability  of  any  person  to  101 

Loaning  powers  of  101 

Loans  on  own  stock  prohibited 109 

Loans  on  stock  of  other  Ill 

Method  of  organizing 421 

Organization  of  8,  430 

Place  of  business   99 

Political  contributions  by,  prohibited  181 


576 

PAGE 

National  Banks — Real  estate  loans  by 304,  330 

Reports  of,  to  Comptroller  125 

Shareholders  (see  Shareholders)  

State  bank  reorganized  as  457,  460 

Suits  by  and  against,  jurisdiction  184 

Taxation  of,  by  states  134 

Title  of  428 

Trust  department  of  236 

Trust  powers   232 

Usury  by   118 

When  a  body  corporate 439 

Who  may  form   8 

National  Gold  Banks  no  Longer  in  Existence 87 

Neglect — Liability  of  Directors  for 165 

Negotiability — Acceptances,  where  payable   328 

Bills  and  notes  made  payable  in  exchange 288,  328 

Bills  of  exchange  252,  32S 

Bills  payable  to  the  order  of  drawee 329 

Bills  payable  with  attorney's  fees  or  collection  charge....  329 

Drafts  payable  with  interest  329 

Sight  drafts  accepted  payable  at  a  future  date 329 

Trade  acceptance  providing  for  extension  of  time 329 

Net  Earnings — Reports  of 127 

New  Stock — Liability  of  subscribers  to  59 

Non-Member  Banks — Collection  of  items  on 287 

Deposits  of  postal  funds  in  276 

Member  banks  as  agents  for,  in  discounting 296 

Member  banks'  deposits  with,  limit  of  296 

Non-Member   Trust  Company  Acceptances — Purchase   of,   by   Re- 
serve Banks   273 

Notes — Demand,  discount  of  248 

Discount  of,  by  Federal  Reserve  Banks 240 

Payable  on  or  before  certain  date  248 

Notice — Comptrollers',  of  impairment  of  capital 515 

Intention  to  go  into  liquidation  146 

Liquidation  by  expiration  of  charter 534 

Special  shareholders'  meeting 507,  513 

To  creditors  in  liquidation   525 

Notification  of  special  dividend  127 

O 

Oath — Directors  of  national  bank  67,  440 

Oath  of  Office — Members  of  Federal  Reserve  Board 227 


577 

PAGE 

Obligations  of  another  bank,  assumption  of 15 

Obligations  of  the  United  States  defined  176 

Officers — Authorized  to  witness  assignments  of  bonds 408 

Binding  bank  to  pay  draft 16 

Bonds  of  17 

Bonds  of,  on  extension  of  charter 543 

Election  of,  in  liquidation  532 

Federal  Reserve  Bank,  removal  of  231 

Federal  Reserve  Bank,  tenure  of  office 206 

Insurance  on  lives  of 18 

Loans  to  16 

Powers  of,  in  liquidation  532 

Powers  of,  to  write  insurance 29 

President  70 

Provisions  in  by-laws  on  452 

Signatures  of  469 

Tenure  of  office  17 

Open  Accounts — Assignment  of,  rediscount  of,  with  Federal  Re- 
serve Bank  246 

Open    Market — Gold    coin    and   bullion,    dealing   in,   by    Reserve 

Banks   268 

Purchases  of  acceptances  and  bills  of  exchange  by  Re- 
serve Banks  265 

Purchases  of  notes,  bonds,  and  warrants  by  Reserve  Banks  269 

Organization  Certificate  8 

Acknowledgment  of  9 

Certified  copy  of  as  evidence 190 

Execution  and  form  of 436,  438 

State  bank  converting  into  national 467 

Organization  Committee — Reserve  bank  198-205 

Obganization  of  FEnERAL  Reserve  Banks 198,  203 

Organization  of  National  Banks 8,  430 

Commencement  of  business 40 

Preliminary  examination  40 

P 

Panama  Canal  Bonds — Deposit  of 78 

Paper — Commercial  or  business   107 

Paper  Currency — United  States,  issue  of 389 

Redemption  of 390 

Returns  for  391 

Transmission  of,  to  Treasurer  392 

Par  Collection  of  Checks — (See  Check  Clearing  and  Collection) 
37 


578 

PAGE 

Pae  Value  of  Capital  Stock 34 

Parity  of  Forms  of  Monet 327 

Partnership — Power  of  national  bank  to  join 17 

Payment  for  Capital  Stock 37,  111 

Payment  of  Usurious  Interest' — Remedy 121 

Penalty — Excessive  loans  106 

Failure  of  national  bank  to  accept  terms  of  Federal  Re- 
serve Act  201 

Failure  of  State  bank  member  to  make  reports 219 

Failure  to  make  tax  return  on  circulating  note 487 

Loan  or  gratuity  to  bank  examiner  302. 

Loans  to  officers,  etc.,  out  of  trust  funds  of  national  bank.  233 

Officers  or  employees  receiving  fees,  etc 302 

Usury  by  national  banks 118 

Violation  of  National  Bank  Act 161 

Place  of  Business  of  National  Banks 99 

Pledge — Liability  of,  of  stock 60 

Political  Contributions  Prohibited   181 

Population  in  Determining  Capital  Stock  34 

Postal  Savings  Bonds — Not  receivable  as  security  for  circulating 

notes    375 

Postal  Savings  Deposits  361 

Advertisements  by  banks 374 

Apportionment  of   369 

Deposit  of  funds  in  banks  370 

Eligibility  of  banks   363 

Excess  deposits 370 

Failure  of  banks  to  repay 374 

Interest,  rate  of 361,  370 

Qualification  of  banks  364 

Reports  of 374 

Resolution  of  withdrawal  of  bonds  held  to  secure 373 

Withdrawal  by  Board  of  Trustees 371 

Withdrawal  by  postmasters 371 

Withdrawals  of  securities  by  banks  372 

Postal  Savings  Funds — Deposit  of,  in  non-member  banks 276 

Prohibition  against  charge  of  exchange  by  banks  on 375 

Repeal  of  conflicting  laws  375 

Powers — Corporate,  of  Federal  Reserve  Banks 205 

Corporations  authorized  to  do  foreign  banking  business. . .  309 

Examiners'   129 

Federal  Reserve  Board's,  over  corporations  authorized  to 

do  foreign  banking  business  309 


579 

PAGE 

Powers  of  National  Banks — Accommodation  paper 15 

Agencies    100 

Agents  in  making  Real  Estate  Loans 28 

Assuming  obligations  of  another  bank 15 

Banking  house  20 

Banking  powers   10 

Borrowing  of  money 14 

Branches  100 

Clearing-house  members  ._ 17 

Commercial  paper 14 

Collections  16,  19 

Contract  to  pay  for  procuring  business 17 

Corporate  powers  9 

Dealing  in  checks  16 

Dealing  in  stocks  and  bonds  12 

Debentures  as  collateral 22 

Deposits  11 

Donations  17 

Duty  to  dispose  of  stock  properly  acquired 13 

Employment  of  attorneys 16 

Government  bonds,  dealing  in 13 

Guaranty  of  paper  sold  by  bank 15 

Insurance  agents 28 

Insurance  on  lives  of  officers 18 

Lending  credit  15 

Lending  money  for  customers 16 

Loaning  powers  101 

Loans  on  own  stock  109 

Loans  on  real  estate 23 

Loans  on  stock  of  other  national  banks Ill 

Loans  to  officers  16 

Money  equitably  belonging  to  others  19 

Partnership  members  17 

Purchase  of  commercial  paper  14 

Purchase  of  municipal  bonds 13 

Purchase  of  own  stock 110 

Purchase  of  stock  in  other  national  banks  13 

Real  estate  holdings   20 

Rediscounts    14 

Security  for  loans 12 

Stock  in  building  companies  21 

Stock  in  corporations  transacting  foreign  business 305 

Stocks  taken  as  security  for  or  in  payment  of  debts 13 

Stocks  and  bonds 12 


580 

PAGB 

Powers  of  National  Banks — Subscriptions  to  Red  Cross 19 

Title  to  stock  illegally  purchased 13 

Ultra  vires  contracts  13 

Powers  of  President  of  Bank  70 

Powers  of  Receiver  150 

Powers  of  Substitution — Form  of 409 

Powers — State  banks  as  members  224 

Visitorial,  limited   130 

Preference — Shareholders'  liability  not  entitled  to 63 

Preferences  Against  Insolvent  Banks  165,  166 

Presentment  of  Paper — After  appointment  of  Receiver 149 

President — Powers  of  70 

Price  of  New  Capital  Stock  510 

Priority  of  Claims  Against  Insolvent  Banks 155 

Printing  of  Circulating  Notes  83 

Printing  of  Federal  Reserve  Notes  282 

Private  Banker — Definition  and  interpretation  of  term 335 

Eligibility  for  membership 225 

Re-organization  as  national  bank 460 

Privilege  Tax 141 

Privilege  of  Extended  Banks   51 

Procuring  Business — Power  of  National  Bank  to  pay  for 17 

Profits — Undivided    112 

Promissory  Note — Definition  of  243 

Promoters — Professional,  in  organizing  national  bank 425 

Protest1 — Of  Circulating  notes 93,  95,  156 

Proxies — Form  of  for  election  of  directors 66 

Special  meeting  of  shareholders 508,  513 

Vote  of  shareholders  by 54,     55 

Public  Moneys — Depositaries  of 44 

Unauthorized  receipt  of 181 

Publication  Certificate  to  Commence  Business 41,  448 

Notice  of  liquidation 526 

Reports  to  Comptroller 125 

Purchase  by  National  Bank  of  Own  Stock  110 

Purchase  of  Drafts  at  Usurious  Rate  117 

Q 

Qualifications — Members  of  Federal  Reserve  Board 227 

Qualifications  of  Directors 66 

Quorum — Provisions  in  by-laws  on  456 


581 
R 

PAQB 

Rate  of  Interest  Chargeable  by  National  Banks 115,  116 

Rates,  Discount — Establishment  of,  by  Federal  Reserve  Banks...  274 

Forward   discount  sales    274 

Preferential,  on  member  bank  notes 274 

Readily  Marketable  Staples — 'Definition  of 249 

Real  Estate  Agents — National  banks  as  330 

Real  Estate — Circular  of  Comptroller  on  real  estate  loans 26 

Conveyance  of,  provisions  in  by-laws  on 453 

Limit  of  loans  to  one  person 25 

Loans  on,  by  Central  Reserve  City  Banks 25 

Loans  on,  by  foreign  branches  of  national  banks 305 

Loans  on,  by  national  banks 23,  304,  464 

Loans  on  city  property  26 

National  banks  as  agents  in  making  loans  on 28 

Power  of  national  bank  to  purchase,  hold  and  convey 20 

Purchase  of,  by  receiver  to  protect  equity 157 

Taxation  of,  of  national  banks  by  States 134 

Receiver — Appointment  by  Court  149 

Appointment  of,  after  liquidation  146 

Appointment  of,  for  impairment  of  capital  519 

Appointment  of,  for  failure  to  pay  circulating  notes 148 

Appointment  of,  in  insolvency  148 

Claims  of  creditors 154,  155 

Contracts  of 151 

Debts  compounded  by 151 

Deposit  of  funds  by  150 

Disposition  of  assets  after  payment  to  creditors 158 

Duties  of  150 

Effect  of  appointment  of 149 

Expenses  of,  paid  from  assets 156 

Injunction  against  appointment  of 156 

Jurisdiction  of  suits  by  and  against 152,  186 

Occupies  same  position  as  bank 153 

Powers  of 150 

Power  of  national  bank  to  act  as 232 

Preferences 165,  166 

Purchase  of  real  estate  by 157 

Sales  by  151 

Set-offs  allowed  by  167 

Suits  against  directors  153 

Suits  by  and  against  152 

State  Courts  and  Statutes  152 


582 

PAGE 

Receiver — 'Supervisory  power  of  Comptroller  150 

Red  Cross — Subscriptions  to  19 

Redemption  Fund  87,     88 

Redemption  of  Circulating  Notes  87,  479 

Disposition  of  notes  redeemed 485 

Redemption  fund   180,  481 

Remittances  482,  484 

"Witnessing  destruction  of  mutilated  notes 479 

Of  failed  bank  95 

Of  liquidating  bank 91,92,    93 

Redemption  of  Paper  Currency  390 

-  Redemption  and  Exchange — Of  silver  and  minor  coin 392 

Rediscounts — Assignment  of  open  account 246 

Bankers'  acceptances  with  Reserve  Banks   244 

Between  Federal  Reserve  Banks  229 

By  national  banks 14 

Drafts  payable  on  condition  245 

Indorsement  "without  recourse"   247 

Member  banks  as  agent  for  nonmember  banks 296 

Notes  and  bills,  liability  of  maker  to  bank 329 

Participation  certificate  in  a  note  247 

Reduction  of  Capital  Stock 43,  511 

Re-extension  of  Charter 543 

Registered  Bonds  412-417 

Exchange  of  coupon  bonds  for 76 

Exchange  for  bonds  of  other  denominations 401 

Resolutions  granting  authority  to  assign,  form  of 406 

Transfer  of  403 

Registry  of  bond  transfers  to  and  by  Treasurer 80 

Registrar  of  Stocks  and  Bonds — National  bank  as 232 

Regulations  of  Comptroller  on  national  banks  as  insurance  agents     29 
Regulations  of  the  Federal  Reserve  Board — Governing  corpora- 
:  tions  authorized  to  do  foreign  banking  business   (Edge 

Corporations)     318 

A — Rediscounts  under  Section  13 241 

B — Open-market  purchases  of  bills  of  exchange,  trade  ac- 
ceptances, and  bankers'  acceptances  265 

C — Acceptances  by  member  banks  of  drafts  and  bills  of 

exchange    262 

E — Purchase  of  warrants  269 

F — Trust  powers  of  national  banks 234 

G! — Real  estate  loans  24 

H— Membership  of  State  banks  and  trust  companies 222 


588 

PAGB 

Regulations  of  the  Federal  Reserve  Board — I — Increase  or  de- 
crease of  capital  stock  of  Federal  Reserve  Banks 2i4 

J — Check  clearing  and  collection 284 

Regulations  of  Treasury — Coupons  detached  from  called  bonds . . .  417 

Issue,  exchange  and  redemption  of  money 389 

United  States  bonds 396 

Regulations  on  Real  Estate  Loans 24 

Remedy  for  Illegal  Taxation  142 

Remedy  Where  National  Banks  Charge  Usury 118 

Remittances  for  Redemption  of  Circulating  Notes  482,  484 

Removal  of  National  Bank  to  Larger  Place 49 

Removal — Officer  or  director  of  Federal  Reserve  Bank 231 

Renewals  of  Usurious  Contracts  120 

Reorganization  Instead  of  Extension  of  Charter 544 

Reorganization — Liquidation  for  purpose  of 532 

Reorganization  of  Reserve  Bank  231 

Reorganization  of  State  Bank  as  National  Bank 457-460 

Replevin — Action  of,  against  Receiver 167 

Reports — Liquidating  agents  to  Comptroller 528,  529 

Of  outstanding  circulation 132 

Penalty  for  failure  to  make,  of  condition 128 

Verification  of 128 

Of  Comptroller  to  Congress  4 

Of  postal  savings  funds  in  banks 374 

To  Comptroller,  liability  of  directors  for  false 164 

To  Comptroller,  publication  of 125 

Reports  of  Dividends  and  Net  Earnings  127 

Reserve  Cities 230 

Reserves  by  member  banks  in 295 

Reserves  by  member  banks  not  in 294 

Status  of,  under  Federal  Reserve  Act 203 

Reserve  Requirements  Not  Applicable  to  Government  Deposits..  348 

Reserves — Against  Federal  Reserve  Notes  278 

Against  Government  deposits 298,  348 

Against  time  deposits  294 

Banks  located  in  United  States,  but  outside  of  Continental 

United  States  300 

Branches,  foreign,  of  national  banks 305 

Calculation  of,  form  for 297,  298 

Carried  by  member  banks  located  in  central  reserve  cities  295 

Carried  by  member  banks  located  in  reserve  cities 295 

Carried  by  member  banks  not  located  In  reserve  or  cen- 
tral reserve  cities  294 


584 

PAOB 

Reserves — Carried  by  member  banks  located  in  outlying  districts  of 

reserve  cities   295 

Deductions  in  determining 298 

Deficient,  tax  on  229 

Eligible  paper  as  29G 

Five  percent  redemption  fund,  as 295,  300 

Form  for  computing 298 

Gold    327 

Gold,  against  Federal  Reserve  notes 278 

Gold  in  gold  settlement  fund  as 288 

Suspension  of  requirements  as  to  229 

Tax  on  deficient 229 

"Withdrawal  of  required  penalties  297 

Residence  of  Directors  of  Federal  Reserve  Banks  207,  211 

Resignation  of  Directors   69 

Resolution — Assignment  of  United  States  bonds  407 

Assuming  liabilities  of  liquidated  bank  in  consolidation..   502 

Applying  for  public  moneys  deposit 357 

Of  shareholders  for  change  of  name  520 

Of  shareholders  for  liquidation 523,  524 

Of  shareholders  to  ratify  consolidation  497 

Of  shareholders  to  reduce  capital  514 

Of  shareholders  to  restore  impaired  capital 517 

Withdrawal  of  postal  savings  bonds  373 

Restrictions  on  Loans  to  One  Person  102, 

Restoration  of  Impaired  Capital 515 

Retirement  of  Circulating  Notes 74,  89,    90 

Retirement  of  Federal  Reserve  Notes  281 

Returns  fob  Paper  Currency 391 

Rules  and  Regulations — Liberty  bonds  and  Victory  notes 399 

S 

Safe  Deposit  Boxes  12 

Salary — Assistants  to  Federal  Reserve  agents 210 

Comptroller  of  the  Currency  226 

Directors  of  Federal  Reserve  Banks 210,  211 

Examiners  129 

Federal  Reserve  Agent  210 

Federal  Reserve  Board  members  226 

Sale  of  Capital  Stock  for  Failure  to  Pay  Installments 28 

Sale  by  Receivers  of  National  Banks 151 

Savings  Accounts — Advertising  of,  by  national  banks  293 

As  time  deposits  294 


585 

PAGE 

Savings  Accounts — Definition  of  293 

Savings  and  Loan  Associations — Under  Clayton  Act 334 

Savings  Banks,  Mutual — Eligibility  for  membership  225 

Savings  Deposits  11 

Seal— Of  national  bank  438,  453 

Secbetaby  of  Tbeasuby — Eligibility  to  hold  office  in  member  bank.  226 

Ex  officio  member  of  Federal  Reserve  Board 226 

Secubity  fob — Acceptances,  substitution  of  259 

Federal  Reserve  notes  277 

Promissory  notes  of  member  banks  to   Federal  Reserve 

Bank  260 

Set— Off 63,  167 

Shabeholdebs — Administrator  as  437 

Agent  for,  after  payment  of  creditors 158 

Agent  for,  after  receivership 158 

Agent  for,  can  sue  directors 161 

Agent  for,  cannot  enforce  liability  of 63 

Annual  meeting  of 65,  452 

Assessment  against  62,     63 

Assessment  by,  where  capital  impaired 112 

Authorization  by,  in  converting  State  bank  into  national 

bank    465 

Consent  of,  to  extension  of  charter 538 

Dissenting,  rights  of  in  consolidation  499 

Dissenting  to  extension  of  charter  542 

Dividends  to,  in  liquidation 146,  532 

Executors  as 437 

Guardians  as  437 

Infants  as  61 

Inspection  of  books  by 130,  145 

Liability  of 56,  57,  304 

Liability  of  executors,  trustees,  etc.,  as  64 

Liability  of,  in  liquidation 147 

Liability  of,  of  Federal  Reserve  Banks 200 

List  of,  to  be  furnished   115 

Married  women  as  58 

Meetings  of 54,     65 

For   liquidation    45 

To  Increase  capital   506 

To   ratify   consolidation    496 

To  reduce  capital    512 

Notice  to,  of  impaired  capital  516 

Notice  of  special  meeting  of 507,  513 

Proxy  for  special  meeting  of 508,  513 


586 

PAOB 

Shareholders — Resolution  of,  for  change  of  name 520 

Resolution  of,  for  liquidation  523,  524 

Rights  of,  in  reduction  of  capital 514 

Resolution  of,  ratifying  consolidation  496 

Rights  of  34 

After  receivership  158 

At  elections   54 

To  subscribe  to  increase  in  capital 42,  509 

Sale  of  stock  of  delinquent  519 

Trustees  as 437 

Voting  by  54 

Who  may  be 437 

Withdrawal  of,  on  extension  of  charter 52 

Shipments — Of  Federal  Reserve  notes,  charges  on 279 

Of  moneys  from  Washington 289,  894 

Of  unfit  notes  to  Washington 393 

Sight  Drafts — As  acceptances  259 

Signatures  op  Officers  441,  469 

Silver  Bullion — Sales  of 383 

Silver  Certificates — As  legal  tender 388,  486 

Deposit  of,  to  reduce  Federal  Reserve  notes 281 

Issue  of 379,  381 

Silver  Coin — Issue  of  890 

Redemption  or  exchange  of 392 

Silver  Coinage — 'Subsidiary  381 

Silver  Coins — Subsidiary  as  legal  tender 387,  487 

Silver  Coin  or  Bullion — Exportation  of 885 

Silver  Dollars  as  Legal  Tender 387 

Silver  Dollars — Melting  of  and  sale  of  bullion 382 

Silver  Ore — Purchase  of  383 

Single  Name — Paper  as  acceptance  268 

Special  Deposits  with  National  Banks  11 

Special  Dividend — Notification  of  127 

Special  Examination  of  Extended  Bank  51 

Special  Shareholders'  Meeting — Notice  of 507,  513 

Stakeholder — National  bank  as  11 

Stamp  Tax  on  Acceptances   258 

On  Federal  Reserve  Bank  stock 218 

On  instruments  issued  by  Reserve  Banks 218 

Standard  of  Value: — Maintenance  of  327 

Staples — Readily  marketable,  definition  of  249 

State  Banks — Consolidation  of,  with  national  491 

Conversion  of,  into  national 45,  461,  471 

Surrender  of  Federal  Reserve  stock  216 


587 

PAGE 

State  Banks — Conversion  of,  with  branches  47,  469 

Directors  of,  converting  into  national  470 

Interlocking  directorates  under  Clayton  Act  . . 335,  336 

Membership  in  Federal  Reserve  System 218-225 

Membership  in  Federal  Reserve  System,  regulations  of  the 

Federal  Reserve  Board  222 

Membership  in  Federal  Reserve  System,  restrictions 219 

Membership  in  Federal  Reserve  System,  withdrawal  from 

membership    220 

Reorganization  as  national  bank 457,  460 

Tax  on  circulation  of 143 

State  Courts — Jurisdiction  of,  In  receivership  cases 152 

Jurisdiction  in  suits  by  and  against  national  banks...  184,  186 

Jurisdiction  of,  in  usury  cases  against  national  banks 123 

State  Laws  Regarding  Usury  by  National  Banks  123 

State  Statutes — Governing  receivership  cases  153 

State  Taxation  of  Circulating  Notes   142 

State  Taxation  of  National  Banks 134 

Statute  of  Limitations — Shareholders'  liability 62 

Usurious  contracts  by  national  banks 119,  121 

Stock  (See  also  Capital  Stock) — Collection  of  taxes  on  shares  of.  141 

Loans  on  and  purchase  of  own 109,  110 

Loans  on,  of  other  national  banks Ill 

National  banks  dealing  in  12 

Power  of  national  bank  to  take  in  building  company 21 

Power   of   national    bank    to    take,    in    corporations    trans- 
acting foreign  business  305 

Purchase  of,  procured  by  fraud 61,    64 

Purchase  of,  in  name  of  infant 61 

Taken  as  security  for  or  in  payment  of  debts 13 

Taxation  of  national  bank,  by  States 134 

Transfers  of  59 

Stockholders — (See  Shareholders) 

Subscribers  to  New  Stock — Liability  of  59 

Subscriptions  to  Capital  Stock — Payment  of 38,  425 

Subscriptions  to  New  Stock — Rights  of  shareholders 509,  511 

Subsidiary  Silver  Coin  as  Legal  Tender 486 

Successive  Assessments  Against  Shareholders  63 

Suits — Against  directors   153 

Against  directors  by  shareholders'  agent 161 

Against  directors  for  violation  of  law 163,  164 

By  and  against  national  bank  receivers 152,  186 

Jurisdiction  of  by  and  against  national  banks  184 

Supervision  Over  Federal  Reserve  Banks  232 


588 

vAcn 

Supeevision  Over  Member  Banks  220 

Surplus    113 

Earnings  of  Federal  Reserve  Banks  paid  into 216 

Increase  of  capital  from 509 

Surrender  of  Federal  Reserve  stock  when  reducing 215 

Suspension  of  Reserve  Bank  231 


Tax — License    141 

Tax  on  Circulating  Notes 131,  132,  486,  490 

Tax  on  Deposits  142 

Tax  on  Deficient  Reserves  229 

Tax— Privilege    141 

Tax — Stamp,  on  acceptances  258 

Taxation — Abatement  of,  on  notes  of  insolvent  banks 133 

Circulating  notes 131,  132,  486,  490 

Collection  of  taxes  on  shares  of  stock 141 

Exemption  of  Federal  Reserve  Banks 218 

Insolvent  national  banks  exempt  from  140 

Remedy  for  illegal  142 

State,  of  circulating  notes  142 

Of  real  estate  of  national  banks 134 

Of  shares  of  stock  of  national  bank 134 

United  States  bonds  exempt  from  143 

Term  of  Office  of  Directors  65 

Of  Federal  Reserve  Banks 207,  211 

Time    Deposits — As    demand    deposits,    when    becoming    payable 

within  30  days 293 

Definition  of  292 

Open  accounts   294 

Reserve  against  294 

Savings  accounts  as  294 

Title  "Federal"  Discouraged  183 

Title  "National"  Prohibited  to  Other  Banks 183 

Title  of  National  Bank  428 

Total  Indebtedness  of  National  Banks — Limit  on  107 

Trade  Acceptances — (See  Acceptances,  Trade) 

Transfers  in  Contemplation  of  Insolvency 165 

Transfer  of  Assets  in  Consolidation 499 

Transfers  of  Capital  Stock 34 

In  liquidation   145 

Sufficiency  of  59 

Transfers  of  Federal  Reserve  Bank  Stock 212,  216 


589 

PAGE 

Tbansfebs  of  Membeb  Banks  From  One  District  to  Another — 

Dividends  on  Federal  Reserve  Bank  stock 217 

Transfers  of  Registered  Bonds  or  Notes  403 

Transfers  of  U.  S.  Bonds  to  and  by  Treasurer 79,     80 

Transportation  Charges  and  Risks  on  Bonds  or  Notes 41 G 

Treasurer  of  U.  S. — Deposit  of  bonds  with 74 

Transfer  of  bonds  to  and  by 79,     80 

Deposit  of  gold  coin  and  certificates  with,  by  Federal  Re- 
serve Banks    288 

Treasury  Notes — Issue  of 386 

Legal  tender 387,  486 

Trust  Companies — Branches  of  225 

Members  of  Federal  Reserve  system  218 

Trust  Powers  Granted  to  National  Banks  232 

Trust  Receipts  as  Security  for  Acceptances  257 

Trustee — As  shareholder 64,  437 

National  bank  as 232 

U 

Ultra  Vibes  Contracts  by  National  Banks  18 

Undivided  Profits   112 

U.  S.  Bonds — Acceptable  to  secure  circulation  474 

As  security  for  public  moneys 479 

Definition  of  76 

Deposit  of,  on  organization  of  national  bank 446 

To  secure  circulation 74,  474,  475 

Discount  of  paper  secured  by  249 

Depreciation  in  value  of,  held  to  secure  circulation 79 

Examination  of,  by  bank's  agent 81 

Exchange  of  1-year  notes  for  30-year  bonds  292 

Exchange  by  Federal  Reserve  Banks  of  2  per  cent,  bonds 

and  1-year  notes   ,,  290 

Interchange  of  bonds  and  notes  of  different  denominations  401 

Interest  checks  on  418,  419 

Issue  of  1-year  notes  and  30-year  bonds  291 

Issue  of  2  per  cent,  bonds  77 

Liberty  loan  bonds  and  Victory  notes 397 

Mutilated  or  defaced   414 

Power  of  attorney  to  agent  to  examine  479 

Purchase  of,  by  Reserve  Banks 75,  269 

Regulations  of  Treasury  Department  relating  to 396 

Resolution  for  assignment  of  407 

Sale  of,  for  failure  to  pay  circulation  95,     96 

Sale  of,  to  Reserve  Banks  74 


590 

PAGE 

U.  S.  Bonds — Security  for  circulating  notes  78,  474 

Tax  exempt 143 

Transfer  of,  in  consolidation  4,    99 

Transfer  of,  on  extension  of  charter 542 

Transfer  to  and  by  Treasurer 79,     80 

Transportation  charges  and  risks  on  416 

Victory  bonds 398 

Withdrawal  of,  in  liquidation 526 

Withdrawal  of,  securing  circulation  476,  478 

United  States  Called  Bonds  forwarded  for  redemption 416 

United  States  District  Attorney  to  Conduct  Suits  189 

United  States  District  Attorney  to  Represent  Receivers 153 

U.  S.  Notes— Legal  tender 387,  486 

Receipt  of  as  collateral  prohibited  170 

U.  S.  Paper  Currency — Issue  of 389 

Usury  by  National  Banks  118 

V 

Vacancies — Board  of  Directors,  how  filled  69 

Directors  of  Federal  Reserve  Banks  211 

Federal  Reserve  Board 228 

Verification  of  Reports  to  Comptroller 128 

Victory  Loan  398 

Violations  of  National  Bank  Act  Penalty  for 161 

Visitorial  Powers  Limited 130,  301 

Visitorial  Powers  of  Federal  Reserve  Board 229 

Voluntary  Liquidation — (See  Liquidation) 

Vote  by  Shareholders 54 

Voting  Trust  55 

W 

Watver  of  Demand — Notice,  and  protest,  acceptances 328 

WArvER  of  Forfeiture  of  Usurious  Interest 124 

War  Paper — Discount  of,  in  excess  of  limitation 237 

War  Savings  Stamps — Paper  secured  by,  eligibility  for  discount..  249 

Warehouse  Receipts — As  security  for  acceptances 255,  256,  257 

Warrants — Purchase  of,  by  Federal  Reserve  Banks 269-273 

Wife's  Separate  Estate  as  Security  22 

Wilful  Misapplication 172 

Withdrawal  of  Bonds  Securing  Circulation 476,  47S 

Withdrawal  of  Capital  Stock  112 

Withdrawal  of  Shareholders  on  Extension  of  Charter 52 

Witnessing  Destruction  of  Mutilated  Notes — Power  of  attorney 

to  agent  for 479 

Worthless  Assets — Writing  off 231 


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AA    000  835  066    j 


